United States Court of Appeals,Sixth Circuit.

SPIRIT AIRLINES, INC., Plaintiff-Appellant, v. NORTHWEST AIRLINES, INC.,

Defendant-Appellee.

No. 03-1521.
Decided: December 15, 2005

Before: MOORE and CLAY, Circuit Judges; HAYNES, District Judge. *ARGUED: Richard Alan Arnold,
Kenny, Nachwalter, Seymour, Arnold, Critchlow & Spector, Miami, Florida, for Appellant. James P.
Denvir, Boies, Schiller & Flexner, Washington, D.C., for Appellee. ON BRIEF: Richard Alan Arnold,
William J. Blechman, Kevin J. Murray, Kenny Nachwalter, Seymour, Arnold, Critchlow & Spector, Miami,
Florida, for Appellant. James P. Denvir, Alfred P. Levitt, Boies, Schiller & Flexner, Washington, D.C.,
Lawrence G. Campbell, L. Pahl Zinn, Dickinson Wright, Detroit, Michigan, for Appellee.
AMENDED OPINION

Plaintiff Spirit Airlines, Inc. appeals from the district court's final order granting summary judgment to the
Defendant Northwest Airlines, Inc. on Plaintiff's claims of monopolization and attempted monopolization
under Section 2 of the Sherman Antitrust Act, 15 U.S.C. 2.1 Spirit alleged that Northwest engaged in
predatory pricing and other predatory tactics in the leisure passenger airline markets for the Detroit-Boston
and Detroit-Philadelphia routes. In sum, the district court found that Spirit's proof had not established
predatory pricing by Northwest in these markets. Specifically, the district court rejected Spirit's definition
of the relevant market as limited to low fare or leisure passengers and adopted Northwest's market
definition of all passengers on these routes. With this conclusion, the district court found that Northwest's
total revenues exceeded its total costs for these routes. Moreover, the district court opined that even if the
low fare or leisure passenger market were the appropriate market, Northwest's expert proof demonstrated
that Northwest's total revenues still exceeded its relevant costs. The district court deemed Spirit's expert
proof and analysis of Northwest's costs and revenue to be implausible. Given these conclusions, the
district court deemed it unnecessary to decide Spirit's other predatory practices claims.

From our review of the record, when the evidence is considered in a light most favorable to Spirit, as is
required in this context, we conclude that a reasonable trier of fact could find that a separate and distinct
low-fare or leisure-passenger market existed. The evidence presented by Spirit in support of such a market
includes Northwest's own marketing data, the testimony of its marketing officials, the findings of
government regulators and Spirit's experts. Moreover, based on the evidence presented, a reasonable trier
of fact could find that at the time of predation, the market in the two relevant geographic routes was highly
concentrated, Northwest possessed overwhelming market share, and the barriers to entry were high.
Accordingly, a reasonable trier of fact could conclude that Northwest engaged in predatory pricing in the
leisure passenger markets on these two geographic routes in order to force Spirit out of the business.
Finally, based on the evidence presented by Spirit's experts, a reasonable trier of fact could find that once
Spirit exited the market, Northwest raised its prices to recoup the losses it incurred during the predation
period. Accordingly, we reverse the grant of summary judgment in favor of Northwest and remand the
case to the district court for further proceedings consistent with this opinion.

A. FACTUAL BACKGROUND2

1. The Parties

Spirit obtained its certificate for a scheduled passenger service in Michigan in 1990 as Charter One. In 1992,
Charter One changed its name to Spirit, a low fare carrier with its base of operations in Detroit. In 1992,
Spirit had four airplanes servicing four cities with 140,931 passengers, approximately 125 employees and
annual revenues of approximately $60 million. Spirit's primary routes were point to point flights between
Detroit-Atlantic City and, for a time, Detroit-Boston. By the end of 1993, Spirit had added service to cities
in Florida and in 1995, Spirit expanded to other cities. Spirit targeted local leisure or price-sensitive
passengers whose travel is generally discretionary, such as passengers visiting friends and relatives, and
tourists or vacationers who might not otherwise fly. Spirit's pricing strategy provided a price incentive to
such leisure travelers with unrestricted, but non-refundable fares. Spirit's services lacked first class
service, frequent flyer benefits, and connecting service. Leisure or low price-sensitive passengers purchase
tickets with restrictions on their use, e.g., an advance purchase or stay-over requirement, in exchange for
low prices for a particular route.

In 1992, Spirit approached the Detroit Metropolitan airport's management about access to additional ticket
counters and gates. Because Northwest had a stranglehold on the gates at Detroit Metro, Spirit's efforts
were futile. (J.A. 1336). Northwest controlled the majority of the gates at the Detroit airport either by
lease or secondary rights from other airlines. Spirit cited an internal Northwest memorandum advocating
that when Detroit built its new airport, the existing Detroit concourses should be destroyed, so that other
carriers would not benefit from the vacuum which is created once [Northwest] vacates its existing gates
at the old Detroit airport. (J.A. 41).

Spirit was allowed to use gates formerly used by Trump Shuttle and Charter, but could not secure a
permanent gate arrangement. Spirit was unsuccessful in its negotiations with U.S. Airways to use two
gates that Northwest subsequently acquired. The district court found that Spirit did secure short term
leases from United Airlines and Continental Airlines, but that Spirit expended $100,000 to add its Detroit-
Philadelphia flight. Spirit also paid a 25% higher landing fee than airlines that had leases with the Detroit
airport authority.

In 1995, Spirit explored expansion of its service between Detroit and other cities, including Boston and
Philadelphia. Mark Kahan, Spirit's general counsel, explained that these two major cities have business
and leisure travelers. With this model, Spirit expected to attract primarily the price conscious or leisure
traveler. Spirit's management considered the Detroit-Philadelphia route a particularly attractive market
given its other flights from the Philadelphia airport and the route's potential base of price-sensitive and
leisure travelers.

On December 15, 1995, Spirit commenced a single daily non-stop round trip flight between Detroit-
Philadelphia on an 87-seat DC-9 airplane at a $49 fare with a load factor of 74.3 percent. Spirit soon
experienced a higher load factor on the Detroit-Philadelphia route in June, 1996, rising to 88.5 percent
from 64.1 percent in January, 1996. On June 28, 1996, Spirit added a second non-stop round trip flight
for the Detroit-Philadelphia route. On April 15, 1996, Spirit started its Detroit-Boston route with one daily
non-stop round trip, initially at fares of $69, $89 and $109.

By 1995, Spirit operated 10 aircraft and serviced 13 travel routes carrying 583,969 passengers and
employing approximately 450 people. By 1996, Spirit increased its capacity to 11 aircraft, with 15 routes.
In June 1996, Spirit had 71,364,828 seat miles with annual revenues of $62.9 million and approximately
455 employees.

Northwest was founded in 1926 as an air mail carrier for the Minneapolis to Chicago route. The firm's
operations at Minneapolis grew and Northwest developed a hub there. By 1986, Northwest merged with
Republic Airlines, which had hubs at Detroit and Memphis. In 1995, Northwest was the fourth largest air
passenger carrier in the United States with annual revenues of $9.1 billion from its domestic and
international operations. At the Detroit Metro airport, Northwest controlled 64 of the airport's 86 gates
and had 78 percent of all passenger travel from the Detroit-Metro airport.

Northwest operates a hub-and-spoke network with hubs at Detroit, Minneapolis-St. Paul and Memphis.
In the hub system, the hub serves as the connecting point for flights between other cities that serve as the
spokes. (J.A. 13). In a word, in this system passengers do not begin or end their journey on a single
flight. The initial flight is from a spoke airport to the hub and after deplaning, the passenger boards a
second flight to the passenger's ultimate destination, another spoke airport. Northwest offers restricted
and unrestricted tickets, airport clubs, frequent flyer benefits, advanced seat selection, first and other
classes of service, and on-board meals. Northwest utilizes the yield management policy, which, in essence,
seeks to maximize the revenue that we earn for our domestic network and try to sell every seat at its
highest possible fare. (J.A 1573).
Prior to Spirit's entry, Northwest offered non-stop service on the Detroit-Boston and Detroit-Philadelphia
routes. For the Detroit-Philadelphia route, Northwest had a 72% market share. For the Detroit-Boston
route, Northwest had an 89% market share. Northwest's only competitor for the service to Philadelphia
was U.S. Airways. (J.A. 779 and 780). US Airways was the highest cost service provider in the market,
(J.A3 479), and Spirit's expert characterized U.S. Airways as a compliant competitor of Northwest. (J.A.
3796). Northwest had six daily non-stop round trip flights on the Detroit-Philadelphia route and U.S.
Airways had four.

2. Northwest Response to S

Northwest adopted its New Competitive Equilibrium Analysis for its response to any new competitor on
its routes. (J.A. 3514). In step one of this analysis, Northwest considers the impact of the new entrant's
service on Northwest's revenue. Id. In step two, Northwest studies whether to add capacity on the route.
Id. Northwest executive Paul Dailey admits that this analysis is more art than science. (J.A. 1649).

At the time of Spirit's entry, Northwest's lowest unrestricted fare for Detroit-Philadelphia flight was $355
and its lowest restricted fare was $125 each way. US Airways' fares were comparable to Northwest's fares.
Initially, neither Northwest nor U.S. Airways reduced its fares nor added capacity after Spirit's entry into
the Detroit-Philadelphia route, until Spirit achieved high load factors, e.g., as high as 88% in April 1996.
Before Spirit's entry into the Detroit-Boston route, Northwest provided non-stop air passenger service on
the Detroit-Boston route with 8.5 daily round trips; its lowest unrestricted fare was $411, and its lowest
restricted fare was $189 each way. Prior to Spirit's entry, Northwest intended to reduce its capacity for
the Detroit-Boston route in the summer of 1996 by 13.7% to 3,238 seats from 3,753 seats.

Effective April 15, 1996, Northwest dramatically reduced its fare on the Detroit-Boston route to $69,
offering this lowest fare on all of its flights. Northwest also increased its daily non-stop round trip flights
on the Detroit-Boston route to 10.5. Northwest added a 289-seat DC-10 airplane that had three times
Spirit's entire daily capacity on the Detroit-Boston route. Prior to Spirit's entry into the market,
Northwest's fare had been in excess of $300. On the Detroit-Boston route, 74.5% of Northwest's
passengers flew on fares at or below $69. For this route, Northwest passengers fares were less than Spirit's
lowest fare on 93.9% of the days during which Spirit flew this route. In July 1996, 74% of Northwest's
passengers on the Detroit-Boston route flew on fares at or below $69, but that percentage fell in September,
1996 to 67%. Spirit's monthly average load factors on the Detroit-Boston route during Northwest's price
response were 18% (April 1996), 21% (May), 24% (June), 31% (July), 29% (August), 17% (September).
Spirit never flew more than 1,700 passengers per month, while Northwest averaged well over 30,000
passengers per month during the same period.

On June 19, 1996, Northwest reduced its lowest fares (including unrestricted) to $49 on all Northwest
flights on the Detroit-Philadelphia route. By August 20, 1996, Spirit discontinued its second flight on the
Detroit-Philadelphia route. On September 30, 1996, Spirit abandoned its Detroit-Philadelphia route.
Northwest resumed its status as the only provider of non-stop service on the route. After Spirit's exit on
this route, Northwest increased its fare initially to $271 and later to $461 as its lowest unrestricted fare.
From July to September 1996, 40.5% of Northwest's passengers flew on fares at or below $49. By
September 1996, 70% of Northwest's passengers flew on fares above $49 on the Detroit-Philadelphia route
and equal to or below $69. In sum, Northwest transported passengers at fares less than Spirit's lowest
fare for 92.5% of the days during the predation period.

Spirit's monthly load factors on the Detroit-Philadelphia route were 43% (July 1996), 36% (Aug.), 31%
(Sept.). As a result, Spirit abandoned its Detroit-Philadelphia route on September 29, 1996. On October
28, 1996, Northwest increased its lowest unrestricted fare on the Detroit-Philadelphia route to $279 and by
April 20, 1998, increased that fare to $416.

B. PROCEDURAL HISTORY

Spirit filed its Section 2 claims against Northwest for anti-competitive and exclusionary practices, including,
but not limited to, predatory pricing. Spirit's complaint alleged, in pertinent part:
As part of this unlawful scheme, and as explained more fully below, Northwest targeted certain of the routes
on which it and Spirit competed and substantially increased capacity and began pricing below Northwest's
average variable cost or its average total cost. Further, as part of its unlawful scheme, Northwest
hampered Spirit's ability to compete at Detroit by denying Spirit access to unused gates controlled by
Northwest and/or charging Spirit unreasonable and discriminatory prices to use those gates, and upon
information and belief, threatening to eliminate or eliminating discounts, promotions or other benefits to
companies in the greater Detroit metropolitan area if those companies designated a carrier other than
Northwest for service to or from Detroit

The combination of very low prices and very high capacity on the Detroit-Boston route caused Northwest's
revenues on that city pair to go into a free fall

At that time, Northwest dramatically lowered its fares, matching Spirit's $49 one-way fare, and increased
capacity on the city pair

Northwest's one-two punch against Spirit in the Detroit-Boston and Detroit-Philadelphia markets produced
the result Northwest intended when, by that start of the fourth quarter of 1996, Spirit was forced to abandon
service in both city pairs.

Joint Appendix at 19 and 20. (emphasis added).

Upon completion of discovery, Northwest moved for summary judgment, contending, in sum, that the
evidence showed: (1) that the relevant service or product market included local and connecting passengers
through the Detroit airport on the Detroit-Boston and Detroit-Philadelphia routes; (2) that at all relevant
times, Northwest's revenues exceeded its average variable costs on these routes; (3) that even if Spirit's
proposed market of price-sensitive or leisure travelers market were appropriate, Northwest's total revenues
on these routes still exceeded its relevant costs; and (4) that Northwest's low price strategy was a pro-
competitive response to Spirit's entry into these geographic markets.

In its response, Spirit relied upon its experts, who opined on the definitions of the relevant geographic and
service markets, the anticompetitive characteristics of this market, the determination of the appropriate
measure of Northwest's costs and the likelihood of recoupment based upon the factual record. In essence,
Spirit's proof was that the relevant product or service market is the low price or price-sensitive or leisure
fare travelers for the Detroit-Boston and Detroit-Philadelphia routes, the undisputed geographic markets.
In Spirit's experts' opinions, the appropriate measure of costs is Northwest's incremental costs for providing
the additional capacity to divert these passengers from Spirit on these routes. By these standards, Spirit's
experts opined that Northwest's prices on these routes were below its average variable costs. Spirit's
expert proof was that within months after Spirit's exit from these markets, Northwest successfully and
completely recouped its losses with substantially higher fares and reduced capacity on these routes.

In addition, Spirit cited Northwest's high market share of enplanements at the Detroit airport, Northwest's
expansion of its capacity on these routes in response to Spirit's entry, and the significant barriers to entry
in this market, as enabling Northwest to engage in a successful predatory campaign to drive Spirit from this
market and to recoup its lost revenues from its predatory pricing on these routes. As the competitive
injury from Northwest's predation, Spirit cited the significant reduction in the number of leisure travelers
on these routes who lost the competitive option of low price travel from the Detroit airport to these cities
and who paid substantially higher prices to travel these routes after Spirit's exit from this market.

In its ruling, the district court adopted Northwest's definition of the relevant product or services market
and found that Northwest's revenues exceeded its costs on these routes. The district court rejected Spirit's
definition of the relevant service market, but concluded that even in that market, Northwest's revenues
exceeded its costs on these routes. As the district court summarized:

[T]he brute market facts established that Northwest's fares did not fall below the airline's average variable
costs, and [] Spirit has not produced sufficient facts or identified pertinent legal authority to validate its
experts' opinion that below-cost pricing occurred in some alternative, legally relevant lowest fare or
price-sensitive market.
 * * * * * *

The law governing claims of predatory pricing as explicated in Brooke Group and endorsed by scholars
including Spirit's own experts, deliberately eschews any qualitative judgments about the competitive
desirability of one business practice verses another. The sole and objective benchmark is whether the
alleged predator's prices exceed its costs, by reference to the products it actually sells and the markets in
which it actually competes with the alleged victim of predation. Under this standard, the record compels
the conclusion that Northwest's prices were not predatory, because the airline operated profitably on both
the Detroit-Boston and Detroit-Philadelphia routes during the entire period of alleged predation.
Consequently, Spirit having failed as a matter of law to establish the first prong of the Brooke Group
standard, Northwest is entitled to summary judgment in its favor on Spirit's claims of predatory pricing.

(J.A. 79, 80).

As to Spirit's remaining Section 2 claims, the district court deemed consideration of them unnecessary given
its conclusion about predatory pricing, as Spirit conceded.

Given this conclusion, the Court need not address Northwest's two remaining arguments in support of its
motion

This leaves only the question whether anything remains of Spirit's claims in this case. As noted at the
outset, Spirit alleges that Northwest engaged in other forms of anticompetitive conduct apart from
predatory pricing, but the parties' current round of submissions addresses only the latter theory of recovery.
To resolve this uncertainty, the Court invited the parties at the December 12 hearing to submit statements
of the remaining issues in this case in the event that Northwest's summary judgment motion were granted.
In its submission, Spirit maintains that portions of its claims for damages and injunctive relief would
remain viable even in the face of such an adverse ruling. Nonetheless, Spirit then states that these
remaining portions, unaccompanied by Northwest's act of predatory pricing, do not warrant the time,
money and resources necessarily involved with the prosecution of the remaining portions of the federal
antitrust action. (Plaintiff's Post-Hearing Statement of What Remains at 3). Consequently, the Court's
award of summary judgment to Northwest leaves nothing further to resolve in this case.

(J.A. 80, 81 at n. 29).

C. THE SUMMARY JUDGMENT RECORD

1. Market Characteristics of the Passenger Airline Industry

The proof before the district court included a Department of Transportation study finding that low-fare air
carriers provide important service and competitive benefits: fare levels are much lower and traffic levels
are higher, on routes served by low-fare airlines. (J.A. 1388). Spirit's expert's analysis revealed that low
fare carriers significantly reduce the fares of major carriers: [i]n markets that do involve dominated hubs,
low-cost service results in average one way fare savings of $70 per passenger, or 40 percent. (J.A. 876, n.
4 quoting the U.S. Department of Transportation, The Low Cost Airline Service Revolution, April, 1996 at
p. 9).

The record also includes a study, Predatory Pricing in the U.S. Airline Industry by Clinton V. Oster of
Indiana University and John S. Strong of the College of William and Mary. The Oster-Strong study notes
that in 1590 markets the number of passengers traveling increased dramatically in response to the large
number of seats offered at low fares. (J.A. 2591). The Oster-Strong study also reflects that there are
Multiple Competitive Tools in this industry that provide price and non-price bases for competition among
airlines.

Multiple Competitive Tools. While the fare a passenger pays is an important element of competition,
airlines don't compete solely on the basis of the price of the ticket. Instead, they compete over multiple
dimensions including: the ticket price; the number of flights a day and the timing of those flights; the
characteristics of the flight itinerary such as whether the flight is nonstop, continuing single-plane service,
or connecting service; rebates to the traveler in the form of frequent flier programs or corporate discounts;
in-flight amenities including food service and how closely the seats are spaced together; ground amenities
including club lounges; and so forth. Airlines can also compete by paying travel agent commission
overrides (TACOs), to encourage travel agents to book passengers on their flights rather than those of a
competitor. To focus only on a single dimension may miss the full range of the ways in which airlines can
compete with one another, particularly if price and cost are narrowly defined.

* * * * * *

Airlines can offer different fares on a given flight, attaching restrictions or conditions of travel to some fares
and, most importantly, offering only a limited number of seats in some fare categories [A]n example of the
coach/economy class fares with associated types of restrictions [is] offered by United Airlines for its flights
1956 from Denver to Miami for travel in January 2001. For this travel, United offered 6 different coach
fares ranging from the lowest fare of $483 to the highest fare of $1,045.

These multiple fares give an airline considerable flexibility in how to price seats on its flights. The airline
could, for example, offer service at low average fares by simply making a large number of seats available in
the lower fare categories, as Northwest did in the third quarter of 1996 in the Detroit to Philadelphia market.
Conversely, if there is sufficient demand and no meaningful competition, the airline can offer most of its
service at high average fares by making few or no seats available in the lower fare categories.

* * * * * *

However, the presence of a low-fare carrier such as Southwest reduces an airline's ability to extract high
fares from travelers.

* * * * * *

The entry of a low-fare carrier dramatically shifts the distribution of fares away from the higher fare classes
toward the lower fare classes. The result is that the average fare fell from about $173 to about $115. Some
high fares still remain after low-fare entry, but a much smaller proportion of travelers pay them. There
are still tickets sold in all of the fare categories after low-fare entry, as was the case before entry, but the
proportion of tickets sold in each of these categories has changed dramatically.

(J.A. 2589, 2590, 2591). (emphasis added).

In the airline industry, access to gates is critical, but access is not determined by open competition and, for
a new entrant, gate access is a substantial barrier to entry. Professor Kenneth Elzinga, one of Spirit's
experts quoted one analyst who summarized this aspect of the market.

While route schedules and pricing for the airline industry have been largely deregulated for over 20 years,
many other aspects of the industry are still highly regulated. Perhaps the most important regulation
comes from local governments, which own and manage the airports in their region and therefore control
key bottlenecks to airport service: access to boarding gates and runways. Most local airport commissions
allocate gates without a formal market mechanism

(J.A. 797). (quoting Gautam Gowrisankaran, Competition and Regulation in the Airline Industry, Federal
Reserve Board of San Francisco Economic Letter, Number 2002-01, p. 1). Professor Elzinga's report
shows that the majority of airport gates are controlled by long-term exclusive-use leases with the local
airport authority. In 1996, the GAO found that 76 of the 86 gates at the Detroit airport were covered by
long term leases until 2008 and Northwest had 64 of such leases.

Michael Levine, one of Northwest's experts in Northwest's action against American Airlines for predatory
pricing opined that: The Barriers to Entry in Those Relevant Hub, Hub-Network, Regional and National
Markets Are Very High. The Barriers to Entry in Hub-to-Hub City Pairs Are Also Very High. Barriers to
Entry in Certain City Pairs Are Also High. (J.A. 926). In that action, Levine also stated that [n]ew
entrants are facing a higher cost of entry than even existing competitors have incurred. (J.A. 928).
Existing [airlines] obtained their initial awareness and facilities base pursuant to government regulations
that protected them from competition. (J.A. 928).

Professor Keith B. Leffler, another Spirit expert, is an Associate Professor of Economics at the University of
Washington who teaches and researches in the areas of industrial organization, antitrust economics and
the economics of contracts. Professor Leffler analyzed Northwest's experts' reports in Northwest's action
against American Airlines for predatory pricing. Professor Leffler found that in those reports, Northwest's
experts opined that:

a. air travel between city-pairs are relevant economic markets in the airline industry;

b. predatory pricing can be a rational economic strategy in the airline industry;

c. recoupment from predatory pricing is likely for an airline dominant in a relevant economic market in
the airline industry;

d. there are substantial barriers to entry into the airline industry;

e. business travelers constitute a distinct market segment in the airline industry;

f. the measure of the average variable cost in the airline industry should include the cost of changing
capacity.

(J.A. 893-94).

2. Market Power

At the time of Spirit's entry into these geographic routes in 1995, Northwest had 78% of all passengers
traveling from the Detroit Metro airport and 64 of 78 gates at the Detroit airport. During 1996,
Northwest's share of the air passenger traveler market at its Minneapolis hub was 75 to 80% of all
enplanements and about 65 to 70% at its Memphis hub. Northwest's share of local passengers on the
Detroit-Philadelphia route was between 60-75% of flown seats. Prior to Spirit's entry into the Detroit-
Philadelphia market, Northwest carried about 70% of the non-stop traffic on this route, and offered six daily
flights; US Airways was a distant second with a market share of about 27%. Prior to Spirit's entry,
Northwest was the prime carrier on the Detroit-Boston route and had an 89% market share for that route.
After Spirit's exit, Northwest resumed its status as the only supplier of local passenger service on the
Detroit-Boston route.

After his review of these markets, Professor Elzinga concluded that Northwest possessed
sufficient market power on the Detroit-Boston and Detroit-Philadelphia routes to make
predatory pricing plausible. (J.A. 3796). In Professor Elzinga's view, Northwest's match of Spirit's
fares for a large number of its passengers who are price sensitive reflected Northwest's ability to engage in
price discrimination by charging higher fares to passengers who are unlikely to travel on Spirit, e.g.,
businesses travelers, even at substantially lower prices.

3. The Relevant Market

As discussed in more detail infra, the factual record reflects that Northwest's internal documents and its
marketing representatives recognize the low price or price sensitive traveler or leisure traveler as a
distinct and relevant market in the air passenger travel market. After a review of this market, Spirit's
experts found that a leisure travel passenger or price-sensitive market exists and cited this
market as the focus of the actual competition between Spirit and Northwest. Two federal
regulators studied this market and also found a distinct market for low fare or price sensitive or leisure
travelers.

4. Northwest's Strategy
Aside from the market issues, Spirit's proof reflects that Northwest's Chief Executive Officer deemed the
Detroit Metro Airport to be Northwest's most unique strategic asset that must be protected at almost all
cost. (J.A. 2396 and 2399). Northwest studied low fare carriers and estimated that competing with such
airlines could cost Northwest $250-$375 million in annual revenue at its hubs. This study expressly
identified Spirit as one such low cost carrier. Id.

In addition, Michael Levine, Northwest's executive vice president, published an article3 in 1987 describing
a two-fold strategy to respond to low fare carriers. This strategy, entitled the new competitive equilibrium
analysis, addresses the impact of a new entrant's service in this market. The essence of the strategy is
simple. Match, or better yet, beat the new entrant's lowest restricted fare to confine its attractiveness to
the leisure oriented price-sensitive sector of the market Make sure enough seats are available on your
flights in the market to accommodate increases in traffic caused by the fare war. In short, leave no traveler
with either a price or a schedule incentive to fly the new entrant. (J.A. 2549). Significantly, Levine states:
The incumbent will not operate profitably under such conditions especially, if, as is usually the case, it is
a higher-cost airline than its competitor. Id.

In its comprehensive study of the industry, the United States Department of Transportation concluded that
Northwest's response forced Spirit's exit from this market and was designed to do so. (J.A. 1406).

5. Recoupment

On the issue of recoupment, Professor David Mills, a Spirit expert, describes the predator's view of below
cost pricing as an investment strategy that is the core of Elzinga-Mills recoupment test for predatory
pricing. Under this test [t]he proper benchmark to use in calculating the predator's reasonably expected
gains and losses is the profit the firm would earn if the target remained in the market. (J.A. 3166). To
determine predation, [t]he first task is to compare Northwest's average fares during the months
when Spirit operated its flights on the [Detroit-Boston] route to the average fares that would
have prevailed on the route, but for Northwest's alleged predation. (J.A. 3169). This factor
measure[s] the monthly financial sacrifice the airline shouldered by charging prices below
the otherwise prevailing level. Id. The second task compares the average fares Northwest
would expect to charge, during the months immediately after Spirit exited the market, to the
average fares that otherwise would have prevailed in the market. Id. This second factor
measure[s] the monthly financial return Northwest could achieve by driving Spirit from the market with
its predatory pricing. Id. The third factor compare[s] the anticipated monthly sacrifice during
predation with the anticipated monthly return during recoupment to understand whether
predatory pricing plausibly would have been a profitable option for Northwest to exercise.
(J.A. 3170).

Considering the evidence on market characteristics in this industry, and applying a number of mathematical
formulae to these facts, Professor Mills concluded, in sum, that Northwest had successfully recouped its
lost revenue within months after Spirit's departure from these routes.

6. Northwest's Non-Price Predatory Practices

Professor Elzinga also deemed Northwest's combination of its matching Spirit's lower prices and its
expansion of its flight capacity on these routes as the keys to Northwest's successful predation against Spirit.
Dr. Daniel Kaplan, a Spirit expert, also challenged Northwest's strategy for the Detroit-Boston route. For
example, to justify the addition of the DC10, Northwest's analysts arbitrarily assumed a 362% increase in
passenger traffic in Detroit-Boston upon Spirit's entry that is wholly contrary to Northwest's price-out
model forecast for these flights.

D. STANDARD OF REVIEW

We review the district court's order granting Northwest's motion for summary judgment de novo.
American Council of Certified Podiatric Physicians and Surgeons v. American Board of Podiatric Surgery,
185 F.3d 606, 619 (6th Cir.1999). We must also consider all facts in the light most favorable to the non-
movant and must give the non-movant the benefit of every reasonable inference. Id. The moving party's
burden is to show clearly and convincingly the absence of any genuine issues of material fact. Sims v.
Memphis Processors, Inc., 926 F.2d 524, 526 (6th Cir.1991) (quoting Kochins v. Linden-Alimak, Inc., 799
F.2d 1128, 1138 (6th Cir.1986)).

The District Court construed the Supreme Court's trilogy of Matsushita, Anderson, and Celotex to have
in the aggregate, lowered the movant's burden in seeking summary judgment. (J.A. 44). We
respectfully disagree. The Supreme Court observed that summary judgment is appropriate where the
antitrust claim simply makes no economic sense, Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S.
451, 467, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992), or [w]here the record taken as a whole could not lead a
rational trier of fact to find for the nonmoving party Matsushita Elect. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citations omitted). The Supreme Court has
preferred to resolve antitrust claims on a case-by-case basis, focusing on the particular facts disclosed by
the record. Eastman Kodak Co., 504 U.S. at 467, 112 S.Ct. 2072 (quoting Maple Flooring Mfrs. Ass'n v.
United States, 268 U.S. 563, 579, 45 S.Ct. 578, 69 L.Ed. 1093 (1925)). Moreover, as the Supreme Court
explained, Matsushita does not increase the non-movant's burden on a motion for summary judgment.
Matsushita demands only that the nonmoving party's inferences be reasonable in order to reach a jury
Kodak, 504 U.S. at 468, 112 S.Ct. 2072.

Later, the Supreme Court noted: In certain situations-for example, where the market is highly diffuse
and competitive, or where new entry is easy, or the defendant lacks adequate excess capacity to absorb the
market shares of his rivals and cannot quickly create or purchase new capacity-summary disposition of the
case is appropriate. Brooke Group Ltd. v. Brown and Williamson Tobacco Group, 509 U.S. 209, 226, 113
S.Ct. 2578, 125 L.Ed.2d 168 (1993). A corollary of this principle of Brooke Group, is that where the market
is highly concentrated, the barriers to entry are high, the defendant has market power and excess capacity,
and evidence of actual recoupment is present, summary judgment is inappropriate.

In a Section 2 action, we observed that only a thorough analysis of each fact situation will reveal whether
the monopolist's conduct is unreasonably anti-competitive and thus unlawful. Byars v. Bluff City News
Co., 609 F.2d 843, 860 (6th Cir.1979) (citations omitted). Our precedents hold that if the opposing party's
expert provides a reliable and reasonable opinion with factual support, summary judgment is inappropriate.
See e.g., Rodgers v. Monumental Life Ins. Co., 289 F.3d 442, 448 (6th Cir.2002) (reversing an order
granting summary judgment where plaintiff's expert opinion was deemed reasonable).

As discussed in more detail infra, we conclude that when the evidence is considered in a light most favorable
to Spirit, a reasonable trier of fact could find that in the relevant geographic and service markets, the
markets were highly concentrated, Northwest possessed overwhelming market share, and the barriers to
entry were very high. As a result, a reasonable trier of fact could conclude that by dropping its prices below
its costs as well as by quickly expanding capacity, Northwest engaged in anti-competitive conduct aimed at
driving Spirit out of the relevant markets. Moreover, based on the evidence presented by Spirit's experts,
a reasonable trier of fact could conclude that following Spirit's exit, Northwest recouped its losses incurred
during the predation period. Accordingly, we conclude that Spirit has presented sufficient evidence of
predatory pricing to withstand summary judgment in this case.

E. LEGAL ANALYSIS

Section 2 of the Sherman Act, in pertinent part, makes it unlawful to monopolize, or attempt to
monopolize, any part of the trade or commerce among the several States 15 U.S.C. 2. [Section] 2
addresses the actions of single firms that monopolize or attempt to monopolize The purpose of the Act is
not to protect businesses from the working of the market; it is to protect the public from the failure of the
market. Spectrum Sports Inc. v. McQuillan, 506 U.S. 447, 454, 458, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993).
Under this statute, the defendant must use monopoly power to foreclose competition, to gain a
competitive advantage, or to destroy a competitor. Eastman Kodak, 504 U.S. at 482-83, 112 S.Ct. 2072
(quoting United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 92 L.Ed. 1236 (1948)).

We must decide whether Spirit has presented sufficient evidence that Northwest engaged in predatory
pricing to withstand summary judgment in this case. Within that general question are several issues of
what a reasonable trier of fact could find, such as whether leisure travelers constitute a distinct
market in this industry; whether Northwest possessed sufficient market power to engage in
predatory pricing; whether Northwest's prices in response to Spirit's entry were below an
appropriate measure of its costs; whether Northwest recouped its lost profits from its
reduced prices; and whether the characteristics of this market would facilitate and render
economically plausible Spirit's assertion of Northwest's predatory pricing. On each issue,
summary judgment principles require us to view the evidence in a light most favorable to Spirit.

As to the merits of Spirit's Section 2 claims, in Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768 (6th
Cir.2002) we summarized the requisite proof for monopolization and attempted monopolization claims:

A claim under 2 of the Sherman Act requires proof of two elements: (1) the possession of monopoly
power in a relevant market; and (2) the willful acquisition, maintenance, or use of that power by anti-
competitive or exclusionary means as opposed to growth or development resulting from a superior product,
business acumen, or historic accident. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585,
595-96, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985) An attempted monopolization [under 2] occurs when a
competitor, with a dangerous probability of success, engages in anti-competitive practices the specific
design of which are, to build a monopoly or exclude or destroy competition. Smith v. N. Michigan Hosp.
Inc., 703 F.2d 942, 954 (6th Cir.1983) (citations and internal quotation marks omitted) Moreover, in order
for a completed monopolization claim to succeed, the plaintiff must prove a general intent on the part of
the monopolist to exclude; while by contrast, to prevail on a mere attempt claim, the plaintiff must prove
a specific intent to destroy competition or build a monopoly. Tops Markets, Inc. v. Quality Markets, Inc.,
142 F.3d 90, 101 (2d Cir.1998). However, no monopolist monopolizes unconscious of what he is doing.
Aspen, 472 U.S. at 602, 105 S.Ct. 2847. Thus, [i]mproper exclusion (exclusion not the result of superior
efficiency) is always deliberately intended. Id. at 603, 105 S.Ct. 2847 (citation omitted).

Id. at 782.

1. Relevant Markets

a. Geographic Market

The threshold issue under Section 2 is the definition of the relevant product and geographic markets in
which [plaintiff] competes with the alleged monopolizer, and with respect to the monopolization claim, to
show that the defendant, in fact, possesses monopoly power. Id. (citation omitted). A geographic
market is defined as an area of effective competition or the locale in which consumers of a product or
service can turn for alternative sources of supply. Id. (quoting Re/ Max Intern., Inc. v. Realty One, Inc.,
173 F.3d 995, 1016 (6th Cir.1999)). The Sherman Act governs localized geographic area(s) and the
relevant geographic submarkets [based upon] commercially significant areas in which the defendant
operated and in which [the defendant's] customers could turn to other suppliers. United States v.
Dairymen, Inc., 660 F.2d 192, 195 (6th Cir.1981) (quoting International Boxing Club of New York, Inc. v.
United States, 358 U.S. 242, 251, 79 S.Ct. 245, 3 L.Ed.2d 270 (1959) and citing Tampa Electric Co. v.
Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961)).

The district court's opinion, the parties' agreement and the proof reflect that the relevant geographic
markets are the Detroit-Boston and Detroit Philadelphia routes. Spirit's expert cited an industry study to
the effect that in the passenger airline industry, [a]t its most basic level, the unit of output of a passenger
airline is transportation of passengers between cities. (J.A. 775). [T]he airline industry is a multiple-
product industry producing and selling thousands of different product-travel between city pairs It is at the
route level, after all, that airlines actually compete with one another. Id. According to the Transportation
Research Board of the National Research Council, [a]irlines compete for passengers at the city-pair level.
There are thousands of combinations of origin and destination (O-D) points that constitute the market for
our transportation system (J.A. 776). In its report, the General Accounting Office stated that city-pairs
can also be used to analyze various air markets. Id.

b. Relevant Service Market

 As to product or service market, in Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8
L.Ed.2d 510 (1962), the Supreme Court emphasized that a product market may have submarkets and the
definition of a market or submarket focuses on economic realities and industry practice. The boundaries
of a (product) submarket may be determined by examining such practical indicia as industry or public
recognition of the submarket as a separate economic entity, the products' peculiar characteristics and uses,
unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized
vendors. Id. (emphasis added).

In White & White, Inc. v. American Hosp. Supply Corp., 723 F.2d 495, 500 (6th Cir.1983), we identified
the reasonable interchangeability standard as a method for defining the relevant product or service
market. We observed that: The du Pont Court noted that reasonable interchangeability may be gauged
by (1) the product uses, i.e., whether the substitute products or services can perform the same function,
and/or (2) consumer response (cross-elasticity); that is, consumer sensitivity to price levels at which they
elect substitutes for the defendant's product or service. Id. (emphasis added and citing United States v.
E.I. du Pont de Nemours & Co., 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264 (1956) and United States v.
Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966)).

The district court adopted Northwest's position that the relevant product or service market includes local
passengers who travel from Detroit on these non-stop flights to either Philadelphia or Boston and
connecting passengers from other Northwest flights who travel to these cities from the Detroit airport.
Based on the proof here, a reasonable trier of fact could find that Spirit and Northwest both recognize
leisure or discretionary or price-sensitive passengers as a distinct market in the air passenger travel
market.

For example, during the relevant period, Northwest had separate fares for business travelers and leisure
travelers. Northwest's internal documents on pricing and passenger fares reflect Northwest's distinction
between business and leisure travel. A Northwest internal document states that its FARE
RESTRICTIONS ATTEMPT SEGMENTATION and that Restrictions are designed to make passengers
reveal their own demand. (J.A. 4182). Michael Gerend, Northwest's manager for domestic pricing,
responded to the following question: Q: Did the Pricing Department make distinctions between business
and leisure products? A. Yes. Q. Do you view the business market and the leisure market as separate
markets? A. Yes. (J.A. 4171). Kenneth Pomerantz, Northwest's director of sales, development and
analysis, answered a similar question: Q: Are they considered two different markets, business travel and
leisure travel? A: I believe they are considered different products. (J.A. 4173-74).

Northwest filed an action against American Airlines for predatory pricing and in that action Northwest's
experts recognized that business travelers constitute a distinct market segment in the airline industry.
(J.A. 893, 894). In his expert report for that action, Michael Levine, a Northwest executive, opined that
there were at least two relevant product market segments in which airlines compete: business and
discretionary and leisure travel. (J.A. 1701). John T. Griffin, another witness in Northwest's action
against American Airlines, stated: There's nothing that necessarily links business fares and leisure fares.
We really have treated those as distinct. And within the objective of attempting to maximize my business
revenue and the leisure revenue separately. (J.A. 4207).

In Northwest's comment on the proposed enforcement policy of the United States Transportation
Department, Dr. Laura D'Andrea Tyson presented a paper for Northwest entitled, Competition in the
Airline Industry: A Response to the Department of Transportation's Proposed Enforcement Policy. (J.A.
4188-4205). In pertinent part, Dr. Tyson stated: Airlines have different products on the same airplane
that offer customers different characteristics and thus cover a wide range of prices All airline seats on a
particular flight provide transportation between the two airports served by that flight, but it is not accurate
to say, even within a specific class, that these seats provide the same service or have the same cost. (J.A.
4202) (emphasis added).

To study this market, Spirit retained Professor Kenneth G. Elzinga, a highly regarded
economist.4 Professor Elzinga is a Professor of Economics at the University of Virginia. Among his prior
experiences are as an economist in the United States Department of Justice and as consultant to the Federal
Trade Commission. Professor Elzinga's publications on antitrust economics, include writings on
predatory pricing, and as noted below, his writings have been cited by the United States Supreme Court in
its predatory pricing opinions. Professor Elzinga also served as a special consultant to the Honorable
Lewis D. Kaplan in a complex antitrust action.

After his study, Professor Elzinga opined that a distinct product or service market existed.
The relevant market for air travel consists of all local passengers whose itineraries
originate in a particular city and terminate in another; in other words, relevant markets
consist of passenger service between city-pairs. In this litigation, the two markets are the city pairs
of Detroit and Boston and Detroit and Philadelphia. (J.A. 773-74). Although Professor Elzinga's market
definition is not expressly limited to price-sensitive passengers, clearly Professor Elzinga's cost-comparison
is so limited. In Professor Elzinga's analysis of the cost-revenue comparison, the relevant passengers in
this market are low fare passengers. (J.A. 793-96). Based on the evidence presented by Spirit, including
Northwest's own documents, the testimony of its officials, and the opinions of Spirit's experts, we conclude
that a reasonable trier of fact could find that leisure or price-sensitive passengers represent a separate and
distinct market in this industry for Section 2 purposes.

2. Monopoly Power

As to whether Northwest possessed monopoly power in this market, the Supreme Court's formulations of
monopoly power are the ability of a single seller to raise price and restrict output, Eastman Kodak, 504
U.S. at 464, 112 S.Ct. 2072 (quoting Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495,
503, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969)), or the power to control prices or exclude competition. United
States v. E.I. du Pont Nemours & Co., 351 U.S. 377, 391, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). [A]s an
economic matter, market power exists whenever prices can be raised above the levels that would be charged
in a competitive market. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 27 n. 46, 104 S.Ct. 1551,
80 L.Ed.2d 2 (1984). We described monopoly power as the defendant's power to raise prices or to exclude
competition when it is desired to do so. Byars, 609 F.2d at 850 (quoting American Tobacco Co. v. United
States, 147 F.2d 93, 112 (6th Cir.1944), aff'd, 328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946)).

The existence of such power ordinarily is inferred from the seller's possession of a predominant share of
the market. Eastman Kodak, 504 U.S. at 464, 112 S.Ct. 2072. Judge Learned Hand enunciated what
has become the classic explanation of when market share becomes large enough to constitute a monopoly:
over ninety percentage is enough to constitute a monopoly; it is doubtful whether sixty or sixty-four
percent would be enough; and certainly thirty-three percent is not. United States v. Aluminum Co. of
America, 148 F.2d 416, 424 (2nd Cir.1945). In Eastman Kodak, the Court cited its earlier precedent that
possession of over two-thirds of the market is a monopoly. 504 U.S. at 481, 112 S.Ct. 2072 (citing
American Tobacco Co. v. United States, 328 U.S. 781, 797, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946)).

As applied here, when Spirit entered the Detroit-Boston and Detroit-Philadelphia markets, Northwest
was the dominant carrier in each market. At the time of Spirit's entry, Northwest had an 89% market
share and became the sole provider on the Detroit-Boston route. Northwest had more than a 70% market
share on the Detroit-Philadelphia route. Prior to Spirit's entry, Northwest competed with only one other
carrier, U.S. Airways, for non-stop service on the Detroit-Philadelphia route. Northwest had 78% of all
passengers traveling from the Detroit airport and controlled 64 of the 78 gates at the Detroit airport under
long-term leases. Once Spirit left this market, Northwest reduced the number of flights on these routes,
restricting output, and increased its fares on these routes significantly. These two measures could
reasonably be interpreted as a clear exercise of monopoly power. Professor Elzinga deemed the facts here
to establish that Northwest had the requisite market power to render its predatory pricing plausible and
successful. We conclude that a reasonable trier of fact could find that Professor Elzinga's opinion is a
reasonable economic conclusion based upon the proof.

In evaluating the economic reasonableness of Professor Elzinga's conclusion, we note commentators' views,
as the Supreme Court commonly does, and as the district court did below. As to requisite power to engage
in successful predatory pricing, Jonathan Baker, a former Senior Economist at the Council of Economic
Advisers and an economist in the United States Department of Justice, opined that If imperfections in the
market for capital cause the prey to have less access to financial capital than the predator, then the predator
may reasonably expect to use its deep pockets' in the traditional way to drive the prey to exit. In addition,
if high prices following the exit of the prey are unlikely to be eroded by new competition (because of entry
barriers), predatory pricing with single market recoupment may no longer be an irrational strategy A firm
can deter aggressive competition with a low price, even if the low price exceeds the price-cutter's average
cost, so long as the price is sufficiently low relative to its rivals' cost. Hence, it is possible that competition
can be harmed by low prices even if those prices are not below the price-cutter's cost. Jonathan Baker,
Predatory Pricing after Brooke Group; An Economic Perspective 62 Antitrust L.J. 585, 591 (1994).

In his article, Predation, Competition & Antitrust Law: Turbulence In The Airline Industry 67 J. Air. L. &
Com. 685, 702 (2002), Professor Paul Stephen Dempsey, a former airline executive and Professor of Law
and Director of the Air and Space Law at McGill University noted that: new entry cannot be sustained
where the incumbent airline is willing to endure significant short-term losses in a below-cost predatory
pricing strategy designed to force the new entrant out of the market (or into bankruptcy) so that after the
new entrant leaves, the incumbent can resume its monopoly price gouging well above competitive
levels.5 According to Professor Dempsey, [w]hen a less-well-capitalized, younger, low-cost, new entrant
airline attempts to enter, the competitive response is predatory, with the intent of driving the new entrant
out of the market. Id. at 735. Chronologically, the predation process is as follows:

1. Major airline establishes dominance at airport serving competitive levels.

2. Dominance allows major airline to price well above competitive levels.

3. When a new entrant attempts to enter a major airline's hub, dominant airline responds with below-cost
pricing, capacity dumping, and/or a number of other predatory practices until the new entrant is driven
out.

4. Once the new entrant is driven out of the market, dominant airlines raises prices to levels sometimes
higher than those prevailing before the new entrant attempted entry.

Id.

These commentators' views of this market and Northwest's conduct within it are consistent with the
opinions of Spirit's economic experts and further confirm our conclusion that a reasonable trier of fact could
find that Northwest possessed the requisite market power to engage in its predatory conduct and that
Northwest successfully used it.

3. The Appropriate Measure of Costs

The next step is to determine the appropriate measure of Northwest's costs to determine if Northwest's
response to Spirit's entry pricing were predatory. Under 2 of the Sherman Act, a plaintiff seeking to
establish competitive injury resulting from a rival's low prices must prove that the prices complained of are
below an appropriate measure of its rival's costs. Brooke Group, 509 U.S. at 222, 113 S.Ct. 2578 (citations
omitted). In Brooke Group, the Supreme Court declined to resolve the conflict among the circuits over
the appropriate measure of costs, but utilized the average variable cost standard [b]ecause the parties in
this case agree the relevant measure is average variable cost. Id. at 223 n. 1, 113 S.Ct. 2578.

In Brooke Group, the Supreme Court explained that we have rejected elsewhere the notion that above-cost
prices that are below general market levels or the costs of a firm's competitors inflict injury to competition
cognizable under the antitrust laws. Low prices benefit consumers regardless of how those prices are set,
and so long as they are above predatory levels, they do not threaten competition We have adhered to this
principle regardless of the type of antitrust claim involved. 509 U.S. at 223, 113 S.Ct. 2578 (quoting and
citing Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990)).
This principle applies to pricing even to predatory pricing by a firm seeking monopoly power, Matsushita,
475 U.S. at 590, 106 S.Ct. 1348 (emphasis added), [e]ven in an oligopolistic market, when a firm drops its
prices to a competitive level to demonstrate to a maverick the unprofitability of straying from the group ,
and [e]ven if the ultimate effect of the cut is to induce or reestablish supracompetitive pricing, discouraging
a price cut and forcing firms to maintain supracompetitive prices, thus depriving consumers of the benefits
of lower prices in the interim. Brooke Group, 509 U.S. at 223-24, 113 S.Ct. 2578. Successful predatory
pricing is inherently uncertain: the short run loss is definite, but the long-run gain depends on successfully
neutralizing the competition and on maintaining monopoly power long enough to recoup the predator's
losses and to harvest some additional gain. Matsushita, 475 U.S. at 589, 106 S.Ct. 1348.

In D.E. Rogers Associates, Inc.v. Gardner-Denver Co., 718 F.2d 1431 (6th Cir.1983), the Sixth Circuit
adopted a modified version of the Ninth Circuit's test in William Inglis v. ITT Continental Baking Co., 668
F.2d 1014 (9th Cir.1981) for the appropriate measure of a rival's cost for a predatory pricing claim:

Although the courts have accepted the marginal or average variable cost standard as an indicator of intent,
many allow for consideration of other factors indicative of predation. A leading example of this hybrid
approach is that taken by the Ninth Circuit in Inglis. There the position was taken that although average
variable cost is a generally reliable indicator, there are market situations where a rational firm would find
it prudent to sell below its average variable cost. See id. at 1035 n. 32. Conversely, it acknowledges that
in certain situations, a firm selling above average variable cost could be guilty of predation. See id. at 1035.
Consequently, it focuses on what a rational firm would have expected its prices to accomplish. Id. at 1034.
Accordingly, it permits the introduction of any evidence, in addition to cost price figures, to illuminate the
rationale behind the defendant's pricing policy.

[W]e hold that to establish predatory pricing a plaintiff must prove that the anticipated benefits of
defendant's price depended on its tendency to discipline or eliminate competition and thereby enhance the
firm's long-term ability to reap the benefits of monopoly power. If the defendant's prices were below
average total cost but above average variable cost, the plaintiff bears the burden of showing defendant's
pricing was predatory. If, however, the plaintiff proves that the defendant's prices were below average
variable cost, the plaintiff has established a prima facie case of predatory pricing and the burden shifts to
the defendant to prove that the prices were justified without regard to any anticipated destructive effect
they might have on competitors. Id. at 1035-36.

Although this circuit has not had an occasion to enunciate a specific cost-based test for predation, we feel
that the Ninth Circuit's modified version of the Areeda/Turner test is appropriate.

Id. at 1436-37 (quoting Inglis, 668 F.2d at 1035-36 with other citations omitted). Later, we stated that
[i]f, however, the plaintiff proves that the defendant's prices were below average variable cost, the plaintiff
has established a prima facie case of predatory pricing and the burden shifts to the defendant to prove that
the prices were justified without regard to any anticipated destructive effect they may have on competitors.
Arthur S. Langenderfer Inc., v. S.E. Johnson Co., 729 F.2d 1050, 1056 (6th Cir.1984) (quoting Inglis, 668
F.2d at 1035-36).

This Court has continued to apply this standard. Directory Sales Mgmnt. Corp. v. Ohio Bell Tel. Co., 833
F.2d 606, 613 n. 3 (6th Cir.1987); Shavrnoch v. Clark Oil & Refining Corp., 726 F.2d 291, 294 (6th Cir.1984);
Morristown Block & Concrete Co. v. General Shale Prods. Corp., 660 F.Supp. 429, 430-31 (E.D.Tenn.), aff'd
829 F.2d 39 (6th Cir.1987) (citing D.E Rogers). See also Schwartz v. Sun Co., Inc., 276 F.3d 900, 903-04
(6th Cir.2002) (price discrimination claim under the Robinson-Patman Act, but the predatory pricing
standard is the same as in a Section 2 action).

In addition to providing his opinions on the relevant markets and their characteristics, Professor Elzinga
was also retained to provide the methodology to determine Northwest's relevant prices and costs. Dr.
Daniel Kaplan, an economist who specializes in airline economics and is the former director of the Office of
Economic Analysis for the Civil Aeronautics Board, performed that analysis. Professor David Mills, an
economist and co-author with Professor Elzinga in the earlier cited articles, analyzed Northwest's
recoupment of its lost profits from its earlier predatory pricing after Spirit's exit from this market.
Professor Mills employed the predation and recoupment test developed with Professor Elzinga and cited by
the United States Supreme Court in its Brooke Group decision.

After defining the relevant markets, Professor Elzinga established the following methodology for
determining Northwest's costs.
To apply the price-cost part of a predation analysis for this case involved examining the marginal or
incremental costs associated with Northwest's response to Spirit compared with the additional revenues
the company received from that response. That is, by incurring the costs of the campaign that Spirit claims
is predatory, what revenues did Northwest receive as a result? Is the difference between these numbers
positive or negative? The analysis, in other words, focuses on revenue from the additional flights (i.e., the
extra capacity) that Northwest added (at discounted fares) because the alleged predation was executed
through those additional flights. Therefore, the assessment of predation compares the revenues (the price)
Northwest received from this tactic versus the incremental (or average variable) cost Northwest incurred
from carrying those passengers.

(J.A. 788) (footnote omitted).

In sum, Professor Elzinga's methodology would determine as the appropriate measure of Northwest's costs,
its average variable costs to transport the non-connecting passengers on the Detroit-Boston and Detroit-
Philadelphia routes. As Professor Elzinga explained, in the alleged predation, Northwest only match[ed]
Spirit's fares for those passengers who might choose Spirit instead of Northwest. (J.A. 795). Professor
Elzinga noted that these standards for the appropriate measure of average variable costs are consistent with
the classic antitrust treatise of Professors Areeda and Hovenkamp in which the scholars posit that [i]n such
a case involving excess capacity and lower prices to marginal customers, the theocratically correct
benchmark is short-run marginal costs with respect to the low price customers. (J.A. 796).6

Utilizing Professor Elzinga's methodology, Dr. Kaplan determined Northwest's actual average variable costs
for the price-sensitive passengers on these routes. Dr. Kaplan utilized Northwest's Flight Profitability
System (FPS) that collects the monthly revenues and costs of each Northwest flight and then aggregates
those numbers to determine the profitability of each hub and the relevant spoke. (J.A. 3256-57). To
calculate costs for the routes at issue, Dr. Kaplan determined Northwest's average variable costs to be equal
to the total variable costs that Northwest incurs serving that city pair during a given time period divided by
the number of passengers traveling in that city pair during that time period. (J.A. 3248). Dr. Kaplan
studied the fares for various months for both city-pairs during 1996. Utilizing Professor Elzinga's
definition of the market, Dr. Kaplan deemed a fare of $225 as a reasonable dividing line between the price
sensitive travelers and other travelers in both city-pairs. (J.A. 3274, 3275). In Dr. Kaplan's analysis, all
those passengers traveling below $225 in both Philadelphia-Detroit and Boston-Detroit were deemed price-
sensitive passengers. Id.

Dr. Kaplan included within average variable costs:7 flight costs, passenger costs, and gate and ticket
counter costs, the latter reflected in depreciation and amortization expenses. (J.A. 3258-60). Dr. Kaplan
opined that in relation to its response to Spirit, Northwest's flight costs included fuel and labor as well as
the cost of the additional aircraft in each market that represented the incremental capacity in Northwest's
response to Spirit's presence. (J.A. 3258). The economic cost of using an airplane was based on the
market lease rate for the airplane. (J.A. 3259). Passenger variable costs for each route were the costs of
processing a passenger's ticket and boarding, the cost of in-flight food and beverages, the expense of liability
insurance, and the incremental cost of the fuel needed to carry each passenger. (J.A. 3259-60). Other
relevant variables costs are for pilots, flight attendants, gate and counter space. (J.A. 3258).

Dr. Kaplan then calculated Northwest's average variable costs for Boston-Detroit and Philadelphia-Detroit
by dividing the various cost factors for each route in each month that Northwest's Flight Profit System
(FPS) identifies as variable, as well as aircraft market value, by the total number of passengers traveling
on that segment during the relevant time period. The monthly average variable cost in Boston-Detroit
ranged between $65.87 and $85.24 during April though September 1996. The monthly average variable
cost ranged between $53.47 and $60.17 in Philadelphia-Detroit during July through September 1996. (J.A.
3266 and 3267). The price range is a function of the variations in the load factor of the flight. (J.A. 3267).

In comparing Northwest's average variable costs and Northwest's average net revenue from the all
passenger service market on these routes, Dr. Kaplan found, in sum:

Boston-Detroit: From April through September 1996, 74.5 percent of Northwest's Boston-Detroit
passengers traveled on fares of $69 or less. [] (Northwest established the $69 fare in response to Spirit's
April 1996 entry into Boston-Detroit). Northwest's $69 fare on Boston-Detroit on average generated per
passenger net revenue of $61.98 after deducting commissions and adding certain other ancillary revenues.
This per passenger net revenue was $10.75 below Northwest's average variable cost. Thus, between April
and September 1996 the $69 fare being used by passengers traveling on Northwest's Boston-Detroit service
was $10.75 below Northwest's average variable cost.

Philadelphia-Detroit: From July through September 1996, 40.5 percent of Northwest's Philadelphia-
Detroit passengers traveled on fares of $49 or less. (Northwest established the $49 fare in response to
Spirit's addition of a second flight between Philadelphia and Detroit at the end of June 1996). Northwest's
$49 fare on Philadelphia-Detroit on average generated per passenger net revenue of $44.29 during this
period after deducting commissions and adding certain other ancillary revenues. This per passenger net
revenue was $11.86 below Northwest's average variable cost on Philadelphia-Detroit in the period from July
to September 1996. In September 1996, 70 percent of Northwest's Philadelphia-Detroit passengers flew
on fares above $49 but equal to or below $69. The $69 fare in September 1996 generated average net
revenue to Northwest of $58.31, which was $1.86 below its average variable cost of serving Philadelphia-
Detroit in that month. Consequently, 65 percent of Northwest's Philadelphia-Detroit passengers flew on
fares that were less than Northwest's average variable cost in July through September 1996.

(J.A. 3249) (footnote omitted).

For the price-sensitive airline passengers market on the Boston-Detroit and Philadelphia-Detroit routes,
Dr. Kaplan performed the same methodology using Northwest's data and found as follows:

Boston-Detroit: [Northwest's] average net revenue from the price-sensitive passengers on this city-pair was
$64.82 between April and September 1996. This figure was $8.07 below Northwest's average variable
cost during that time period.

Philadelphia-Detroit: [Northwest's] average net revenue from the price-sensitive passengers on this city-
pair was $50.35 from July to September 1996. This figure was $6.53 below Northwest's average variable
cost during that time period.

(J.A. 3250).

As noted earlier, both parties' experts calculated Northwest's average variable costs based upon data from
Northwest's FPS data system, but Northwest's expert reached different results in his calculation of
Northwest's costs and revenues.

Northwest's expert, Professor Janusz A. Ordover, is a Professor of Economics at New York University and
former Deputy Assistant Attorney General for the Antitrust Division of the United States Department of
Justice. Professor Ordover identified his four step test to determine whether Northwest engaged in
predatory pricing and monopolization:

1. A structural analysis of the relevant market;

2. An assessment of the likelihood of anticompetitive (exclusionary) effects resulting from the alleged
conduct;

3. An analysis of pertinent prices (or revenues) and costs to assess whether the competitive response made
business sense only because of its adverse impact on competition and would not have made sense if the
rival remained viable; and

4. An evaluation of whether the firm is able to recoup the profits foregone during the period of the
predatory behavior.

(J.A.387). Yet, for his initial analysis, Professor Ordover deemed only an analysis of Step 3 necessary. In
a rebuttal report, Professor Ordover addressed the other three factors. In a word, Professor Ordover
concluded that by comparing Northwest's average variable costs on each route to Northwest's revenue from
all passengers traveling on that route, including connecting passengers, it became clear that Northwest had
an incremental profit on each route.

In his analysis, Professor Ordover considered the total revenue from all passengers, leisure travelers as well
as connecting passengers, earned from these routes and compared those revenues to Northwest's variable
costs for those flights. Revenues from fares of all airline passengers business were totaled and divided to
yield an average fare. Professor Ordover then compared Northwest's average prices with its average
variable costs on the Detroit-Philadelphia and Detroit-Boston routes during the months when Spirit
operated on these routes. (J.A. 395). For his determination of route level costs and resources, entitled
the competitive response package, Professor Ordover included total onboard revenue plus the allocated
segmented revenue from the connecting passengers on a flight, plus a beyond contribution from the flow
connecting passengers. (J.A. 401-02).

As to variable costs, Professor Ordover included several of the same cost elements as Dr. Kaplan, but for
the costs of the aircraft, Professor Ordover declined to use the commercial lease rates for the aircraft and
instead chose the opportunity costs of the aircraft and its least attractive alternative deployment within the
airline's system. (J.A. 402). Utilizing the components of Northwest's FPS, Professor Ordover found, in
sum, as follows:

As seen there, both VABS and VABSO8 were positive during the time period when Northwest was
matching, or partially matching, Spirit's fares (April through September 1996). For example, in June 1996
the VABS measure was approximately $5.8 million for the route and the VABSO measure was
approximately $5.0 million. These June 1996 amounts are equivalent to about $68 and $58 per one-way
segment passenger, respectively. The positive VABS and VABSO results for April through September
indicate that the average fare plus the beyond contribution from passengers traveling between Detroit and
Boston exceeded average variable cost.

Further, even the measures that do not take account of the beyond contribution, the VAC and VACO
measures, were positive in every month (i.e., Northwest's average Detroit-Boston segment fare exceeded its
average variable cost). Indeed, the only negative profitability measure is the May 1996 fully allocated
contribution (FAC), which excludes the beyond contribution and is equal to total revenue minus fully
allocated expenses. When the beyond contribution is included, in the fully allocated with beyond
contribution (FABS), this cost measure was positive for May 1996. As discussed above, variable rather
than fully allocated costs are the pertinent standard; yet the fact that Northwest was profitable even based
on the much higher fully allocated cost standard during this period provides further support for the
conclusion that its conduct was not predatory.

[According to] FPS data for the Detroit-Philadelphia route for 1995 and 1996[,][b]oth VABS and VABSO
were positive during the entire time period when Northwest was matching Spirit's fares on this route (July
through September). The July 1996 amounts of approximately $2.8 million for VABS and $2.5 million
for VABSO, for example, are equivalent to about $67 and $60 per one-way segment passenger, respectively.
In addition, both the variable cost-based measures that do not take account of the beyond contribution
(VAC and VACO) and the measures based on fully allocated costs (FAC and FABS) were positive in every
month.

In summary, the positive FPS profitability measures based on variable costs clearly demonstrate that
predation did not occur on the Detroit-Boston and Detroit-Philadelphia routes. In addition, with revenues
exceeding the pertinent measure of total cost, each route clearly makes economic sense. Put another way,
an airline would not deliberately lose money on the routes by offering the schedule of flights that it did.
This means that the competitive response makes sense even if the competitor continues to be viable.

(J.A. 403-04).

Based on his comparison, Professor Ordover concluded that Northwest's average fares on the routes
exceeded its average variable costs. From these findings, Professor Ordover inferred that Northwest's
pricing response to Spirit's entry on these routes would have been profitable even if Spirit had continued to
serve these cities.
Professor Ordover criticizes Dr. Kaplan's segmentation of Northwest's average variable costs for local
passengers on those routes because all passengers, including connecting passengers, contribute to the
revenue of the flight as part of the hub network. Id. Moreover, Professor Ordover notes that added capacity
affects more than revenue, including enhancement to the overall schedule to connecting flights, reduction
in crowding and increasing the availability of attractive fares. Hence, Professor Ordover views any
contribution of revenues from connecting passengers as necessary to assess whether Northwest's response
was predatory.

In his rebuttal report, Professor Elzinga supported Dr. Kaplan's comparison of Northwest's prices and costs
in the leisure traveler market as the more appropriate measure of average variable costs. (J.A. 871). In
Professor Elzinga's view, Professor Ordover improperly calculated all passengers revenue on each of those
routes, including connecting passengers. (J.A. 8741). Professor Elzinga explains that the relevant market
is the local passengers because those are the passengers whom Northwest sought to divert from Spirit.

As to Professor Ordover's statement that: each route (and flight) is part of a network; if the route or flight
were removed there would be a reduction in revenues not only from that route or flight but also on other
routes in the network, citing a Northwest document called Boston-Detroit STIMULATION ANALYSIS,
Dr. Kaplan responded that this document actually demonstrates that Northwest had flexibility to adjust
capacity to accommodate changes in local and connecting passenger demands independently of one
another. (J.A. 886). In Dr. Kaplan's view, this document also demonstrates that additional connecting
passengers in Boston-Detroit provided little value to Northwest. Id. Dr. Kaplan also cited Northwest's
plan to reduce its scheduled capacity in the summer of 1996 before Spirit's entry and opined that this
decision suggest[s] that revenue generated by the added passengers would not cover the opportunity cost
of serving them. (J.A. at 888). Spirit also noted that Northwest executive vice-president Michael E.
Levine acknowledged that: All connecting passengers are not of equal value. The least valuable
connecting passengers who go through a hub are purely price driven and not-not a very interesting source
of revenue; it's just that you use them to fill seats. Id.

To be sure, Professor Leffler, a Spirit expert, cited the opinion of Northwest's expert, Robert S. Pindyck, on
the appropriate measure of average variable costs in Northwest's action against American Airlines for
predatory pricing. Professor Pindyck is the Mitsubishi Bank Professor of Applied Economics at the Sloan
School of Management at the Massachusetts Institute of Technology. Professor Pindyck's research and
teaching are in the areas of industrial organization and antitrust economics, and his writings include articles
on monopoly power and pricing that have been published in leading economics journals. Professor
Pindyck is an author or co-author of six books, including two leading textbooks, Microeconomic and
Econometric Models and Economic Forecasts. In Northwest's action against American Airlines for
predatory pricing, Professor Pindyck opined: Although costs have been measured for all domestic national
airline passenger service, it may be useful to determine costs separately for business service and leisure
service. (J.A. at 954) (emphasis added). Moreover, in the action against American Airlines, another
Northwest expert stated: All airline seats on a particular flight provide transportation between the two
airports served by that flight, but it is not accurate to say, even within a specific class, that these seats
provide the same service or have the same cost. (J.A. 4202) (emphasis added).

Professor Elzinga noted that his standards for the appropriate measure of average variable costs are
consistent with the classic antitrust treatise of Professors Areeda and Hovenkamp, in which the scholars
assert that [i]n such a case involving excess capacity and lower prices to marginal customers, the
theocratically correct benchmark is short-run marginal costs with respect to the low price customers. (J.A.
796) (quoting Phillip E. Areeda and Herbert Hovenkamp, Antitrust Law, Vol. III, 740 at p. 428 (2d edition
2002)).

As we stated earlier, we conclude that a reasonable trier of fact could find that the underlying cost data from
Northwest's data systems, which Professor Elzinga and Dr. Kaplan used in their analyses, is reasonably
accurate and that this data supports their cost calculations for the price-sensitive market. Northwest's
expert used the same cost data in his cost-revenue analysis. If a reasonable trier of fact could accept
Professor Ordover's cost determinations as reasonably accurate, it stands to reason that Spirit's experts'
determinations, which are based on the same cost data, must be deemed reasonably accurate as well.
To be sure, the district court found that Spirit failed to explain why it is not necessary to isolate the costs
of serving price-sensitive passengers from those incurred in serving Northwest's remaining passengers.
(J.A. 71). Spirit's cost analysis included cost measures that were not specifically linked to price-sensitive
passengers, but common to all passengers. Spirit's experts explained their rationale for using this metric
rather than a figure more narrowly defined to the price-sensitive market. We hold that a reasonable trier
of fact could find Spirit's rationale convincing and therefore conclude that the costs attributable to all
customers is a reasonably accurate proxy for the costs associated with price-sensitive passengers only.

The evidence reflects that in its data system, Northwest did not consider any meaningful differences to exist
in the average variable costs for different passengers. Northwest's FPS data system that both Dr. Kaplan
and Professor Ordover utilized to calculate Northwest's costs for these routes, does not distinguish among
passengers in its allocations of costs. (J.A. 4410-12). Northwest's Price-Out Model, for its flight
profitability analysis likewise does not distinguish between passengers in computing costs. If a reasonable
trier of fact could find Northwest's FPS data system and Price-Out-Model are accurate and reliable for
cost allocations, then Dr. Kaplan's use of that same data must be reasonably accurate as well.

Moreover, as Dr. Kaplan explained, non-passenger variable costs such as crew, fuel and possibly aircraft do
not vary with passengers because the same service is provided to both sets of passengers. As Dr. Kaplan
stated:

I assumed the cost of providing service on a route such as [Detroit-Boston/Philadelphia] had roughly
constant returns to scale and that consequently looking at the average variable cost was a reasonable
representation of what their cost would be if they expanded capacity, expanded output on the route.

My view is that there are reasonably constant returns to scale. And, the reason that I believe that is
airlines have a variety of mix of aircraft of different ages and different sizes and different configuration.
And as consequences, when you are looking at the operation in any given route, it's perfectly reasonable
to assume that when they expand capacity it will roughly be at the cost at which they had provided the
capacity that [had] existed prior to that.

(J.A. 4274, 4294) (emphasis added). Professor Ordover, Northwest's expert, considered his dispute with
Spirit's economic experts on the determination of the appropriate measure of average variable costs to be
an intellectual disagreement. (J.A. 1734).

For summary judgment purposes, we think this evidence supports the reasonable inference that average
variable costs did not vary among passengers and thus, Spirit's experts' cost determinations could be found
by the trier of fact to be reasonable. In our view, a trier of fact could reasonably accept Spirit's experts'
definition and calculation of Northwest's incremental costs to attract the leisure travel passengers on these
routes as the appropriate measure of Northwest's average variable costs for deciding Spirit's Section 2 claim
against Northwest. We conclude that this intellectual disagreement among the parties' experts creates
material factual disputes on the relevant market and the appropriate measure of costs for the service at
issue so as to preclude an award of summary judgment. Although the district court found that Spirit's
expert-opinion testimony made no economic sense, we conclude that a reasonable trier of fact could find
that the testimony of Spirit's experts is reasonable based upon facts in the record and relevant economic
principles.

In support of its summary judgment motion, Northwest relies upon the Tenth Circuit's decision in United
States v. AMR Corp., 335 F.3d 1109 (10th Cir.2003), in which the Government alleged that American
Airlines engaged in predatory pricing on routes from its hub at Dallas-Fort Worth airport in an attempt to
drive emerging low-cost carriers out of the market. At issue in the case was the viability of the four price-
cost tests which the Government claimed demonstrated that American Airlines was pricing below its costs.
In granting summary judgment in favor of American Airlines, the Tenth Circuit held that none of the four
tests the Government had utilized was a true measure of the incremental cost of adding additional
passengers on the challenged routes. Therefore, the court held that the Government's evidence of alleged
predatory conduct made no economic sense. Relying on this holding, Northwest argues that Spirit's price-
cost analysis is similarly flawed. We disagree.
First, unlike three of the tests in AMR, Northwest does not contend that Spirit's price-cost test is flawed
because it includes a portion of fixed costs or measures reduced profitability. Instead, Northwest relies
on the Tenth Circuit's rejection of a price-cost test that included arbitrarily allocated common costs which
do not vary proportionately with changes in American Airlines' capacity. The Tenth Circuit held that it
was inappropriate to evaluate incremental passenger revenue against these more general administrative
and overhead costs. By contrast, in this case, Spirit's price-cost analysis is based on Northwest's FPS
system which specifically distinguishes between fixed and variable costs, defining the latter term as costs
which do vary with flight activity. Northwest's expert conceded that the FPS system calculates a reasonable
approximation of the average variable costs for a route and is the proper measure to use in evaluating
allegations of predatory pricing. (J.A.402). Accordingly, we conclude that a reasonable trier of fact could
find that Spirit's price-cost analysis is accurate and reliable, and therefore distinguishable from the analysis
put forth in AMR.

To be sure, as Northwest argues, in Directory Sales, where the market was advertisement services, we
found that the plaintiff's showing of sales below costs must be determined as to the Defendant's overall
charges. 833 F.2d at 614. Yet, we did so only because [w]e are persuaded that the first [free] listing
[advertisement] is not a separate product market for the purposes of predatory pricing. Id. Directory
Sales is factually inapposite and distinguishable. We adopt the principle of Brooke Group that where
reasonable economic proof justifies a relevant market, the appropriate measure of costs for a predatory
pricing claim is for the particular good or service in that market, not all products or services sold by the
defendant.

Other Circuits have determined the appropriate measure of cost for predatory pricing claims to be the
average variable cost of the product or service in the relevant market. Multistate Legal Studies, Inc. v.
Harcourt Brace Jovanovich Legal & Prof'l Publ'ns, Inc., 63 F.3d 1540, 1549 n. 7 (10th Cir.1995) (where the
products at issue involved full-service bar review courses and supplemental workshops the Tenth Circuit
stated, the relevant product market for predatory pricing's cost-price analysis is the supplemental
workshop rather than the [the full service and supplemental bar review] package); U.S. Anchor Mfg., Inc.
v. Rule Industries, Inc., 7 F.3d 986, 996 (11th Cir.1993) (where the products were brand anchors as well as
generic and economy anchors that were sold by both parties, the Eleventh Circuit stated: We hold, however,
that the relevant market in this case constituted light weight generic and economy fluke anchors. Four of
the Brown Shoe factors weigh strongly in favor of excluding Danforths [the brand product] from the
relevant market.).

4. Significant Barriers to Entry

In this Circuit, another factor in determining predatory pricing is whether barriers to entry
are high because [t]he existence of high entry barriers is significant in determining the
existence of predatory intent, inasmuch as only where such barriers exist will there be
incentive to price predatorily. Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 824
(6th Cir.1982).

Here, the record reveals that Northwest controlled sixty-four of the seventy-eight gates at the Detroit airport
under long-term leases. Levine, a Northwest executive, testified that these leases created a very high
barrier to entry into the Detroit market for any competitor. To provide service from Detroit, Spirit had to
pay $100,000 to access a gate as well as 25% higher landing fees than airlines with long-term leases, like
Northwest. Relying on this evidence in the record, a reasonable trier of fact could certainly conclude that
significant barriers to entry existed in the Detroit market which made predatory pricing possible.

Moreover, a law review note collecting economic studies of this market reported as follows:

[T]he linear point-to-point structure that predominated under regulation was replaced by a nearly
pervasive hub-and-spoke system. While some have praised the hub-and-spoke system for its efficiency,
many others have also described its utility as an entry-deterrence strategy.

Legacy airlines remain dominant in the industry, and their hub-and-spoke route structure is still the
industry's single most important structural characteristic
Economists studying networks have demonstrated that adopting a hub-and-spoke structure is an effective
means of entry deterrence. Part of this deterrence stems from the market power that hubbing creates on
flights that originate or terminate at the hub. Since the hubbing airline typically controls a large
proportion of the flights in and out of its hub airport, it can raise fares on those flights without fear of
competitive entry. Furthermore, an airline's dominant presence at its hub may allow it to exert veto power
over any plans to expand the airport's capacity, which further limits the possibility of competitive entry and
its attendant check on market power. According to some scholars, having a large network also enables
legacy airlines to price predatorily on routes served by entrants, thereby causing the entrant to expend cash
reserves and exit the market while the incumbent experiences an economy of scope in the value of
reputation for fierceness as a deterrent to other entrants in other markets or in the future.

Note, Compatibility And Interconnection Pricing In The Airline Industry: A Proposal For Reform, 114
Yale L.J. 405, 423, 424, and 425 (2004) (emphasis added and footnotes omitted). Another law review
note describes the market power that this barrier creates in this industry: When an airline controls a
substantial percentage of enplanements at an airport, it wields significant power over its competitors' access
to airport space. Note, The Antitrust Implications Of Airport Lease Restrictions, 104 Harv. L.Rev. 548,
567 (1990).

In sum, the facts and the economics of this industry could reasonably be found to establish significant
barriers to entry. Further, a reasonable fact-finder could conclude that these barriers enabled Northwest's
predatory pricing to be plausible and successful.

5. Recoupment

The second prerequisite under 2 of the Sherman Act, is proof that the competitor recovered or had a
reasonable prospect or a dangerous probability of recouping its investment in below-cost prices.
Matsushita, 475 U.S. at 589, 106 S.Ct. 1348; Cargill v. Monfort of Colorado, Inc., 479 U.S. 104, 119 n. 15,
107 S.Ct. 484, 93 L.Ed.2d 427 (1986). For the investment to be rational, the [predator] must have a
reasonable expectation of recovering, in the form of later monopoly profits, more than the losses suffered.
Matsushita, 475 U.S. at 588-89, 106 S.Ct. 1348. It must be remembered that: Recoupment is the
ultimate object of an unlawful predatory pricing scheme; it is the means by which a predator
profits from predation. Without it, predatory pricing produces lower aggregate prices in
the market, and consumer welfare is enhanced. Although unsuccessful predatory pricing
may encourage some inefficient substitution toward the product being sold at less than its
cost, unsuccessful predation is in general a boon to consumers. Brooke Group, 509 U.S.
at 224, 113 S.Ct. 2578.

As the Supreme Court explained, proof of sales below the defendant's appropriate measure of costs and the
likelihood of recoupment are prerequisites to recovery [that] are not easy to establish, but they are not
artificial obstacles to recovery; rather, they are essential components of real market injury. Id. at 226,
113 S.Ct. 2578.

For recoupment to occur, below-cost pricing must be capable, as a threshold matter, of producing the
intended effects on the firm's rivals, whether driving them from the market, or, as was alleged to be the goal
here, causing them to raise their prices to supracompetitive levels within a disciplined oligopoly. This
requires an understanding of the extent and duration of the alleged predation, the relative financial strength
of the predator and its intended victim, and their respective incentives and will. See 3 Areeda & Turner
711b. The inquiry is whether, given the aggregate losses caused by the below-cost pricing, the intended
target would likely succumb.

If circumstances indicate that below-cost pricing could likely produce its intended effect on the target, there
is still the further question whether it would likely injure competition in the relevant market. The plaintiff
must demonstrate that there is a likelihood that the predatory scheme alleged would cause a rise in prices
above a competitive level that would be sufficient to compensate for the amounts expended on the predation,
including the time value of the money invested in it. As we have observed on a prior occasion, [i]n order
to recoup their losses, [predators] must obtain enough market power to set higher than competitive prices,
and then must sustain those prices long enough to earn in excess profits what they earlier gave up in below-
cost prices.

Id. at 225-26, 113 S.Ct. 2578.9 (quoting Matsushita, 475 U.S. at 590-91, 106 S.Ct. 1348).

Likewise, we have required proof of an injury to competition by a firm's predatory pricing, to sustain a
Section 2 claim of monopolization.

In determining whether conduct may be characterized as exclusionary, it is relevant to consider its impact
on consumers and whether it has impaired competition in an unnecessarily restrictive way. Aspen, 472
U.S. at 605, 105 S.Ct. 2847. If a firm has been attempting to exclude rivals on some basis other than
efficiency, it is fair to characterize its behavior as predatory [or exclusionary.] Id. However, merely
because an entity has monopoly power, does not bar it from taking advantage of its scale of economies
because of its size. Id. at 597, 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467. Such advantages are a
consequence of size and not the exercise of monopoly power. Id.

Conwood, 290 F.3d at 783 (emphasis added). In Conwood, we deemed a predator's conduct causing
higher prices and reduced consumer choice harmful to competition. Id. at 789.

Professor Mills, one of Spirit's experts, calculated Northwest's recoupment from its predatory pricing within
months after Spirit's exit from these routes. Professor Mills concluded:

V.A. Northwest Monthly Sacrifice During Predation in the DTW-PTL

Northwest did not cut its fares in response to Spirit's entry on the Detroit-Philadelphia route until Spirit
added a second flight in late June 1996. Once underway, Northwest sustained its low fares until Spirit
halted both of its flights on the route and withdrew from the Detroit-Philadelphia market in late September
1996 (the same month Spirit withdrew from the Detroit-Boston market).

I apply the same methodology used in the Detroit-Boston market to calculate the average monthly sacrifice
Northwest would expect to incur by charging predatory prices in the Detroit-Philadelphia market. To get
this quantity, I calculate and average the monthly sacrifice for each of the months July, August, September
1996. This quantity measures the sacrifice Northwest would expect during every month it charged
predatory prices.

Values for Northwest's anticipated average monthly sacrifice are shown in estimates of E the elasticity of
Northwest's residual demand, in the range of 0.3-1.0 [F]or instance, if the price elasticity of Northwest's
residual demand were 0.65, Northwest's average monthly sacrifice during predation, using cost based
estimates for the otherwise prevailing price, would have been $241,126.

V.B. Northwest's Monthly Returns After Predation in the Detroit-Philadelphia Market

As before, the second task is to calculate the average monthly return Northwest expected to receive
immediately after Spirit exited the Detroit-Philadelphia market. Applying the same methodology used in
the Detroit-Boston market, I calculate and average the monthly return Northwest anticipated on both a
looking forward basis and a looking backward basis. I do this for the three months of November 1996-
January 1997 for the looking forward scenario and for the same three months in 1995-1996 for the looking
backward scenario.

Values for Northwest's anticipated average monthly return are shown in alternative estimates of E ranging
from 0.3 to 1.0. For instance, if the price elasticity of Northwest's residual demand were 0.65, Northwest's
average monthly return during recoupment would have been $756,845, evaluated on a looking forward
basis, and $570,769 evaluated on a looking backward basis.

V.C. How Long Does Recoupment Take in Detroit-Philadelphia

To judge whether Northwest would have anticipated that predatory pricing in the Detroit-Philadelphia
market would be profitable, one must compare Northwest's anticipated monthly sacrifice during predation
with the airline's anticipated monthly return during recoupment. If Northwest expected that it would take
two-four months of predation to drive Spirit out of the market (in fact, it took three months), how many
months of recoupment would the company have needed to recoup its predatory investment? The answer
to that question is found using the same approach as before in the Detroit-Boston market.

Based on the values of M and R , an annual hurdle rate of 15% and the residual price elasticity measures
used before, and substituting values and six for p, the number of months of predation anticipated, I find
how long Northwest would expect it to take to recoup its investment in predatory pricing

For instance, if Northwest's otherwise prevailing prices were those predicated by the cost-based approach,
and if it anticipated two months of predation, Northwest would recoup its investment during the first month
of recoupment. If the airline anticipated four months of predation, Northwest would recoup its
investment during the second month of recoupment. Recoupment is not as immediate using the
comparable market-based otherwise prevailing prices. But even if Northwest's otherwise prevailing prices
were those predicted by the comparable market approach, and if it anticipated two months of predation,
Northwest would recoup its investment between the second and fourth month of recoupment, depending
on the elasticity of its residual demand. And if it anticipated four months of predation, Northwest would
recoup its investment between the third and seventh month of recoupment, depending on its elasticity of
residual demand. Just as in the Detroit-Boston market, Northwest could not expect to be back in the
black in the Detroit-Philadelphia market as quickly as if otherwise prevailing prices were lower.

V.D. Is Recoupment Plausible in the Detroit-Philadelphia Market?

Given entry conditions, and especially the gate-constrained conditions Northwest's potential competitors
faced at Detroit, as Professor Elzinga emphasized, Northwest certainly would have expected its renewed
high prices to last long enough for the airline to recoup its investment in predatory pricing. Barriers to
entry were sufficiently high that Northwest would not have expected Spirit to re-enter, or another entrant
to arrive, for a period substantially longer than the necessary recoupment period. This conclusion is
supported by the fact that, in retrospect, the first and only significant entry event in Detroit-Philadelphia
since Spirit withdrew from the market occurred in May 1998 when Pro Air introduced service between
Detroit City Airport (DET) and PHL. This happened nineteen months after Spirit's withdrawal; there was
ample time for Northwest to recoup its investment in predatory pricing before Pro Air challenged
Northwest's dominance in the market.

(J.A. 3185-88).

The trier of fact could reasonably find that Northwest recouped any losses from its predatory pricing
quickly after Spirit left these routes. Here, Spirit's expert proof shows that Northwest recovered its losses
within months of Spirit's exit from the market. In addition, upon Spirit's exit, Northwest increased its
prices on these routes to a multiple of seven from its prices during Spirit's presence. These facts could
also lead a reasonable juror to conclude that a competitive injury occurred in this market, namely, air
travelers' payment of higher prices by consumers for air travel on these routes.

After Spirit's exit, Northwest also dropped flights notwithstanding the increased customer
demand of price-sensitive travelers for those routes. The significant adverse competitive
impact from Northwest's conduct could reasonably be found to be those Detroit consumers
who were leisure travelers to Boston and Philadelphia and who lost a choice of airlines.
These consumers suffered not only a reduction in the supply of flights to these cities, but to travel these
routes, had to pay an almost seven-fold price increase. With the very high barriers to entry, the
consumers for this route likely would not have any viable alternatives to Northwest airlines
for the foreseeable future. To be sure, the antitrust laws are for the protection of competition, not
competitors. Brooke Group, 509 U.S. at 224, 113 S.Ct. 2578 (emphasis in the original quoting Brown Shoe,
370 U.S. at 320, 82 S.Ct. 1502). Yet, in a concentrated market with very high barriers to entry, competition
will not exist without competitors. See Andrew I. Gavil, Exclusionary Distribution Strategies by
Dominant Firms: Striking A Better Balance 72 Antitrust L.J. 3, 81 (2004).
6. Spirit's Non-Price Predation Claims

As stated earlier, Spirit also maintained that a key component of its monopolization claim and Northwest's
predatory strategy was Northwest's expansion of its capacity on these routes. Professor Elzinga identified
this response as critical to Northwest's successful predation. Michael Levine, a Northwest executive, had
authored an article espousing this strategy for responding to new low fare carriers. The district court
deemed its finding on the cost issue to be determinative. We respectfully disagree.

Contrary to the district court's conclusion that proof of Northwest's revenues exceeding its average variable
costs effectively ends the inquiry, Brooke Group emphasized that even where theory suggests that predatory
pricing is rare, [h]owever unlikely that possibility may be as a general matter, when the realities of the
market and the record facts indicate that [a predatory pricing scheme] has occurred and was likely to have
succeeded, theory will not stand in the way of liability. 509 U.S. at 229, 113 S.Ct. 2578 (citing Eastman
Kodak, 504 U.S. at 466, 467, 112 S.Ct. 2072). In Conwood, we explained [a]nticompetitive conduct can
come in too many different forms, and is too dependent upon context, for any court or commentator ever
to have enumerated all the varieties. 290 F.3d at 784 (quoting Caribbean Broad. Sys. Ltd. v. Cable &
Wireless PLC, 148 F.3d 1080, 1087 (D.C.Cir.1998)). Moreover, in D.E. Rogers, we adopted the Inglis rule
that acknowledges that in certain situations, a firm selling above average variable cost could be guilty of
predation. 718 F.2d at 1436 (citing Inglis 668 F.2d at 1035).

More particularly, the Third Circuit has held that a defendant's sales above its costs does not end the Section
2 analysis. In its en banc decision in LePage's Inc. v. 3M (Minnesota Mining and Manufacturing Co.), 324
F.3d 141 (3rd Cir.2003), the Third Circuit stated:

Assuming arguendo that Brooke Group should be read for the proposition that a company's pricing action
is legal if its prices are not below its costs, nothing in the decision suggests that its discussion of the issue is
applicable to a monopolist with its unconstrained market power

[Brooke Group] does not discuss, much less adopt, the proposition that a monopolist does not violate 2
unless it sells below cost. Thus, nothing that the Supreme Court has written since Brooke Group dilutes
the Court's consistent holdings that a monopolist will be found to violate 2 of the Sherman Act if it
engages in exclusionary or predatory conduct without a valid business justification.

Id. at 151, 152.

Spirit's experts provided a reasonable economic explanation of the anticompetitive effects of Northwest's
two-prong response to Spirit's entry on these routes, that included a rapid expansion of Northwest's
capacity on these routes. As Professor Elzinga explained:

The goal of predation in this case is for the incumbent firm, Northwest, to drive the entrant, Spirit, from the
market. The most effective way for Northwest to do this is to divert passengers that would have otherwise
flown on Spirit to Northwest, thereby lowering Spirit's revenues below its costs. This is in fact what
happened. Spirit's load factor plummeted after Northwest lowered prices to match Spirit's and added
capacity. Spirit's per passenger costs for serving its remaining customer base rose.

If Northwest simply lowered its price on its extant flights and did not add capacity, it is unlikely that a
sufficiently large number of Spirits's passengers would be diverted and as a consequence drive Spirit from
the market. The reason is because Northwest presumably had optimized its capacity utilization before
Spirit entered and so Northwest could not add a large number of additional passengers even at lower prices
unless it also increased capacity. Thus, a critical element of predation in the markets at issues here is not
only whether Northwest lowered its prices but whether Northwest added capacity as part of a predatory
strategy in order to drive Spirit's load factor so low that Spirit could no longer remain in the market.

The lowering of price on Northwest's extant capacity would seldom if ever be judged predatory under the
price-cost test suggested by Areeda and Turner. This is an artifact of the cost structure in the airline
industry compared to conventional manufacturing plants envisioned by Areeda and Turner. In the airline
industry, the marginal cost of additional passengers on extant flights with excess capacity is very low, and
below almost any imaginable fare. But even very low prices on extant flights are unlikely to drive a low-
price entrant from the market because such low prices on extant flights would not divert sufficient
passengers to cause the entrant to exit.

In contrast, when a major carrier like Northwest drops prices radically and adds capacity and output, it
incurs all of the variable costs associated with additional capacity described earlier. Thus, if the incremental
costs of capacity additions (aimed at serving the new lower-fare passengers that Northwest hopes to divert
from Spirit) are more that the incremental revenues, then the addition of capacity is predatory because it
entails losses that can be explained only as an investment to drive Spirit from the market. These
incremental costs can be avoided by not adding capacity. Consequently, the revenues and costs of
additional capacity are (or at least should be) the focus of the analysis of predation in the airline industry.

For a firm with market power, such as Northwest on the routes in question, economic analysis teaches that
it is not optimal to add capacity whose costs exceed revenues in response to entry unless the incumbent can
hope to drive the entrant from the market. The reason is that a firm with market power sets its output (or
selects its market capacity) so that marginal revenue equals marginal cost. When a new firm enters the
market, the (residual) demand curve for the incumbent firm decreases (shifts to the left), thereby decreasing
the incumbent firm's marginal revenue and making it optimal to lower price and reduce capacity and output,
not increase it as did Northwest.

(J.A. 792-94). This explanation is wholly consistent with the strategy described by Levine, Northwest's
executive, and is corroborated by the Oster-Strong economic study on the Multiple Competitive Tools in
this industry.

In sum, even if the jury were to find that Northwest's prices exceeded an appropriate
measure of average variable costs, the jury must also consider the market structure in this
controversy to determine if Northwest's deep price discounts in response to Spirit's entry
and the accompanying expansion of its capacity on these routes injured competition by
causing Spirit's departure from this market and allowing Northwest to recoup its losses and
to enjoy monopoly power as a result.

For these collective reasons, we reverse and remand this action for further proceedings in accordance with
this opinion.

While I agree with the majority's holding, I write separately to express my own views on this complicated
case.

I. ANTITRUST LAW

Any court reviewing a claim brought under 2 of the Sherman Act, 15 U.S.C. 2, must be especially
mindful of the fine line between illegal predation and healthy competition. As the Supreme Court has
stated, [i]t would be ironic indeed if the standards for predatory pricing liability were so low that antitrust
suits themselves became a tool for keeping prices high. Brooke Group Ltd. v. Brown & Williamson
Tobacco Corp., 509 U.S. 209, 226-27, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). Thus, successful predation
claims are limited to the rare instance in which an incumbent seeks to retain monopolist control in the
future by ceasing to engage in economically rational behavior in the present in an effort to drive potential
rivals from the market. Predation is not proven merely through the absence of profit maximization but
rather through the absence of profitability itself in the relevant market. See MCI Communications Corp.
v. AT & T Co., 708 F.2d 1081, 1114 (7th Cir.) (holding that imposing a profit-maximization rule as the
standard for liability would tend to freeze the prices of dominant firms at their monopoly levels and would
prevent many pro-competitive price cuts beneficial to consumers), cert. denied, 464 U.S. 891, 104 S.Ct.
234, 78 L.Ed.2d 226 (1983). Therefore, only when predatory prices are set below an appropriate measure
of costs will liability be imposed.

Additionally, to establish a predatory-pricing claim, a plaintiff must demonstrate that following the
predation period, the incumbent has a reasonable prospect, or, under 2 of the Sherman Act, a dangerous
probability, of recouping its investment in below-cost prices. Brooke Group, 509 U.S. at 224,
113 S.Ct. 2578. As the Court has noted, [r]ecoupment is the ultimate object of an unlawful predatory-
pricing scheme; it is the means by which a predator profits from predation. Id. Put another way,
recoupment is the return to monopolist control which is at the heart of the incumbent's anti-competitive
behavior. Having established the two requirements for proving a predatory-pricing claim under 2 of
the Sherman Act, I turn to the claims presented in this case.

II. THE AIRLINE INDUSTRY

Applying the theoretical principles outlined above to the reality of the airline industry presents a challenging
task. Inquiring into whether Northwest Airlines, Inc. (Northwest) charged prices below an appropriate
measure of costs implicates several peculiarities of the airline industry. Professors Areeda and Turner,
the first commentators to propose a specific cost-based standard for predatory pricing, argued that pricing
below short-term marginal cost should be deemed unlawful. Phillip Areeda & Donald F. Turner, Predatory
Pricing & Related Practices under Section 2 of the Sherman Act, 88 Harv. L.Rev. 697, 712 (1975). Given
the real-world difficulty in ascertaining a firm's marginal cost, however, Professors Areeda and Turner
suggested using a firm's average variable cost, defined as total variable costs divided by total units produced,
as a proxy for marginal cost. Id. at 700, 716. Thus, in a traditional industry, if a manufacturer prices its
product, a widget, below the average variable cost of producing widgets, the Areeda-Turner model would
find the price to be predatory.

Unlike a traditional manufacturer, however, the airline industry presents a more complicated scenario
because the bulk of its variable costs are common costs shared among all passengers on a flight. Once an
airline commits to flying a plane along a specific route, the airline must incur the costs of the pilots, flight
attendants, fuel to fly the empty plane, ownership of the plane, and servicing, without regard to the actual
number of passengers on the plane. Despite the common nature of these costs, they are still treated as
variable costs of the route because the airline could avoid incurring all of them by exiting the route and
redeploying the plane to an alternative route. In addition to these common-variable costs, the airline
incurs incremental costs for each additional passenger added on the plane. These passenger-variable costs
include the costs associated with processing the ticket, beverage and food service (if any), incremental fuel
required to carry the passenger, and baggage service. Thus, the passenger-variable costs are quite minimal
compared to the common-variable costs, or non-passenger variable costs of the route. This
disproportional nature between the passenger-variable costs and the common-variable costs has significant
implications with regard to evaluating a predatory-pricing claim. For example, suppose on a given
route the common-variable costs were $1,000 and the passenger-variable costs were $10 per
passenger, and only two passengers were flown, the total variable costs would be
approximately $1,020, and the average variable cost would be $510. A fare charged below that
amount would be considered predatory pricing under the Areeda-Turner analysis. With each additional
passenger added to the plane, however, the average variable cost declines because the common-variable
costs are the bulk of the airline's expense and the incremental cost of each additional passenger is so
minimal. Thus, if twenty passengers flew on the plane, the total variable costs would be
approximately $1,200, and the average variable cost would be $60. Thus, in this scenario,
under the Areeda-Turner model, a fare must be below $60 to be considered predatory.

The analysis of the airline market takes on an additional level of complexity when price discrimination is
taken into account. Anyone who has ever flown on short notice can attest to the fact that similar seats on
the same plane are not priced identically. Indeed, once an airline has committed to flying a plane on a
certain route and the common-variable costs have already been incurred, it is in the airline's interest to fill
the capacity on the plane given the fact that the incremental cost of each additional passenger is so low and
each passenger further reduces the average variable cost. Thus, airlines often sell deeply discounted fares
to utilize the unused seats. As Professors Areeda and Hovenkamp have stated, [i]n the airplane case the
seat is going out anyway, full or empty, and any price above the cost of serving the additional passenger will
make the additional sale profitable. III Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law 742c,
at 466 (2d ed.2002). The question before a court in evaluating an antitrust claim becomes
whether predatory pricing should be evaluated based on each individual fare or on a larger
route-wide basis. For example, under the scenario laid out above, if ten passengers paid a fare of $120
each and thereby covered the total variable costs, while the remaining ten passengers paid a discounted fare
of $50 each, the route itself would be profitable, generating $500 more than the total variable costs. The
$50 discounted fare, however, would be below the average variable cost, and therefore, the question before
the court would be whether pricing on that fare should be considered predatory. This is precisely the issue
at the heart of Spirit Airlines, Inc. (Spirit)'s 2 claim against Northwest.

The Eighth Circuit has rejected such a narrow fare-specific approach, holding that it is necessary to
consider not just [an airline's] lowest prices, but all of its prices for the routes involved, for that is the only
basis upon which the relationship between [the airline's] charges and costs could be determined. Int'l
Travel Arrangers v. NWA, Inc., 991 F.2d 1389, 1396 (8th Cir.1993), cert. denied, 510 U.S. 932, 114 S.Ct. 345,
126 L.Ed.2d 309 (1993). In this court, we have not addressed this issue of whether the broader airline-
passenger market could be further segmented into other fare-specific markets or instead whether the
overall route profitability is the proper analysis.1 Accordingly, I turn to the arguments of the parties
presented in this case.

III. SPIRIT'S ARGUMENT

The crux of Spirit's complaint in this case is that in response to Spirit's entry into the two relevant
geographic markets, Detroit to Boston (DTW-BOS) and Detroit to Philadelphia (DTW-PHL), Northwest
dropped its fares below its average variable cost and added capacity to drive Spirit out of the
two markets. Moreover, Spirit alleges that shortly after it was forced out of the two markets, Northwest
raised its fares to pre-predation levels to recoup its sacrificed profits. In support of its claim, Spirit
presented expert reports from three notable economists, Professor Kenneth G. Elzinga, Dr. Daniel P. Kaplan,
and Professor David E. Mills.

In his report, Professor Elzinga explained that the relevant market in which to evaluate Northwest's
predation is that in which Spirit competed-namely, point-to-point travel on the two relevant geographic
routes (hereafter local passengers). Thus, Professor Elzinga argues that Northwest's revenue generated
from connecting passengers (passengers with destinations other than the origination and destination cities)
should not be included in the analysis. Moreover, Spirit's strategy was directed only towards price-
sensitive leisure travelers, because it offered only one to two flights a day, sold its tickets on a non-
refundable basis, and did not offer first-class service, a frequent-flyer program, or onboard meals. Thus,
Professor Elzinga argues that because Spirit did not compete with Northwest for local price-insensitive
business travelers, those revenues should be excluded from any predation analysis as well. Instead,
Professor Elzinga contends that the relevant market at issue should be limited to Northwest's actions in the
local, price-sensitive passenger market.

Relying on Professor Elzinga's analysis of the relevant market, Dr. Kaplan evaluated the actual fares offered
by Northwest in both the local market and the more specific, local, price-sensitive market. Dr. Kaplan
then measured those fares against the average variable cost based on all passengers (including connecting
passengers and price-insensitive passengers). Dr. Kaplan's rationale for using the average variable cost
as determined by all passengers flown is that passenger-variable costs such as processing the ticket or
beverage service do not vary materially between connecting and local passengers or price-sensitive and
price-insensitive passengers. Moreover, by including all passengers flown, the average variable cost is lower
than if the value was calculated just based on local price-sensitive passengers. Comparing Northwest's
fares to the average variable cost, Dr. Kaplan concludes that both in the local market as a whole as well as
the sub-market of price-sensitive passengers, Northwest charged fares below its average variable cost.

The last of Spirit's three expert witnesses, Professor Mills, argues that given the structure of the market at
Detroit Metropolitan Wayne County Airport (DTW), Northwest could be reasonably assured of recouping
profits it sacrificed during the predation period. Specifically, Professor Mills argues that because of its
dominance at DTW and the scarcity of available gates for new entrants, Northwest could reasonably have
expected not to face another entrant following Spirit's exit from the market. Accordingly, Professor Mills
concludes that Northwest could have been reasonably confident that it could return to pre-predation prices
to recoup profits sacrificed during predation. Having summarized Spirit's argument, I now turn to
Northwest's response.

IV. NORTHWEST'S RESPONSE

Northwest's response to Spirit's experts is contained in the report of its own expert, Dr. Januz Ordover.
Dr. Ordover challenges each of the premises of the arguments of Spirit's three experts. First, Dr. Ordover
argues that Professor Elzinga improperly concluded that the relevant market at issue is something other
than the total-passenger market on the two relevant geographic routes. Second, Dr. Ordover challenges
Dr. Kaplan's price-cost analysis by arguing that it was error to compare a subset of passenger revenue with
the average variable cost calculated for all passengers. Finally, Dr. Ordover claims that Dr. Mills's
recoupment analysis is flawed because it relies on several incorrect assumptions. I will briefly touch on
each of Dr. Ordover's points.

With regard to Professor Elzinga's definition of the relevant market, Dr. Ordover argues that it is simply
contrived to view the sub-segments of passengers which travel on the two relevant routes as separate
markets. Dr. Ordover states that [a]t the route level, this means that the airline must cover the costs of
its operations on the route, and that at least on some of the routes in the system it must earn enough
contribution in excess of the route-specific costs to cover the remaining costs of operating the airline.
Joint Appendix (J.A.) at 604 (Ordover Rebuttal Report at 9). Thus, Dr. Ordover concludes [e]very
airline attempts to cover these costs by striving to earn net contribution from all types of passengers on the
route, not just the ones segmented out by the Plaintiff's experts. Id. Therefore, he argues that it is the
mixture of fares from business travelers, leisure travelers, and connecting passengers, which the airline
attempts to optimize to ensure profitability on each route. 2 For example, Dr. Ordover would argue that a
below-cost leisure fare may be offset by a significantly higher above-cost business fare, but so long as the
mix of revenue ensures profitability, the airline is behaving rationally.

With regard to Dr. Kaplan's price-cost analysis, Dr. Ordover faults Dr. Kaplan's comparison of local, price-
sensitive fares to the average variable cost for all passengers. Dr. Ordover argues that because the vast
majority of variable costs are common costs, it is simply arbitrary to allocate them equally among all the
passengers. Instead, he would argue that the higher-priced fares should be allocated a higher percentage
of the common-variable costs, while the lower-priced fares, such as the local, price-sensitive fares, should
be allocated less. For example, Dr. Ordover would claim that there is no inherent reason why a business
fare of $120 and a local leisure fare of $60 should be allocated the same share of common-variable costs,
such as the pilot's salary. The effect of the uniform allocation of common-variable costs only serves to
make one fare very profitable while the other is not. Instead, Dr. Ordover would argue that the appropriate
way to measure costs for purposes of evaluating predatory pricing is to calculate the incremental average
variable cost for the additional passengers generated by Northwest's low-fare campaign. Specifically, he
explains that by taking the passenger-variable costs for the incremental passengers Northwest gained as a
result of its low-fare campaign plus the common-variable costs associated only with the additional capacity
Northwest added to the two routes during the campaign, divided by the total incremental passengers gained,
gives a true measure of the variable costs of Northwest's pricing strategy. Dr. Ordover concludes by noting
that the low fares which Northwest offered in response to Spirit were still above the incremental average
variable cost for the additional passengers on both routes.

Finally, Dr. Ordover critiques Professor Mills's recoupment analysis. Specifically, Dr. Ordover disputes
several of Professor Mills's assumptions upon which his analysis relies. A recoupment analysis determines
whether it is plausible that the alleged predator would likely recover the profits it sacrificed during the
predation period following the new entrant's exit from the business. Inherent in the analysis is reliance
upon a number of key assumptions, such as what profits Northwest would have earned if Spirit had not
entered the market. Dr. Ordover disputes Professor Mills's assumptions about what fares Northwest
would have charged absent Spirit's entry. Dr. Ordover also argues that Northwest did not expect that by
simply matching Spirit's fares, Spirit would be forced out of the market. Finally, he explains that the
barriers to entry at DTW were not sufficiently high as to prevent another competitor from entering the
market once Spirit exited. Therefore, he argues Northwest could not reasonably expect to recoup any
monopolist profits.

V. LEGAL ANALYSIS

Having studied the expert reports submitted in this case, I believe both sides have presented credible
opinions, which are supported by evidence presented in the record. Specifically, a reasonable trier of fact
could find that Spirit's experts have put forth a compelling argument that Northwest did engage in
predatory pricing in the limited market in which Spirit competed that eventually forced Spirit out of the
market. In addition, a reasonable trier of fact could conclude instead that the relevant market must be
viewed as the route itself and that predation cannot be measured by just one type of fare. As we have
stated, however, determination of the relevant product market is an issue for the jury to decide. See Lewis
v. Philip Morris Inc., 355 F.3d 515, 533 (6th Cir.2004) (holding that the definition of the relevant product
market is a factual inquiry for the jury; the court may not weigh evidence or judge witness credibility)
(internal quotation omitted), cert. denied, 543 U.S. 821, 125 S.Ct. 61, 160 L.Ed.2d 31 (2004).

Moreover, even if the relevant market is found to be price-sensitive leisure passengers,

disputes exist regarding whether Northwest priced its fares in that market below average
variable cost and whether recoupment was a plausible strategy. Thus, a reasonable trier
of fact could find either that Dr. Kaplan demonstrated that Northwest's matching fares were
below its average variable cost or instead could agree with Dr. Ordover's opinion as to the
correct formulation of variable costs. In addition, a reasonable trier of fact could find that Professor
Mills had persuasively explained that recoupment was plausible or instead could adopt Dr. Ordover's
reasoning that the assumptions upon which Spirit relied were flawed.

In sum, because I find that both parties' expert opinions were reasonable, supported by evidence in the
record, and could each be found persuasive by a reasonable trier of fact, I conclude the district court erred
in granting Northwest summary judgment in this case. Specifically, the district court erred in adopting
Northwest's expert analysis over the one presented by Spirit. Like the majority opinion, I believe that the
parties' competing expert opinions present the classic battle of the experts' and it [is] up to a jury to
evaluate what weight and credibility each expert opinion deserves. Phillips v. Cohen, 400 F.3d 388, 399
(6th Cir.2005) (internal quotation omitted) (alteration in original). At the summary judgment stage of a
case, the district court should not weigh the evidence or judge the credibility of witnesses. See Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (holding that [c]redibility
determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are
jury functions, not those of a judge, [when] he is ruling on a motion for summary judgment). Accordingly,
I concur with my colleagues that the decision of the district court should be reversed and the case should
be remanded for further proceedings.

FOOTNOTES

1. During the pendency of this appeal, Northwest filed for bankruptcy. The automatic stay under 11
U.S.C. 362(a)(1) applies to this appeal. In re Delta Air Lines, 310 F.3d 953, 956 (6th Cir.2002). Upon
the parties' stipulation, the bankruptcy court entered an order lifting the automatic stay for a decision on
Spirit's appeal.

2. As discussed infra, because the district court granted Northwest's motion for summary judgment,
under the applicable law, we are required to view the factual record in a light most favorable to Spirit, the
non-moving party.

3. Levine, Airline Competition In Deregulated Markets, 4 Yale J. of Reg. 393, 476-78 (1987).

4. Spirit's experts, Professors Kenneth Elzinga and David Mills have authored economic studies on
predation that have been cited by the United States Supreme Court in its antitrust decisions on predatory
pricing. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226, 113 S.Ct. 2578, 125
L.Ed.2d 168 (1993); Texas Indus., Inc. v. Radcliff Materials. Inc., 451 U.S. 630, 637 n. 8, 101 S.Ct. 2061, 68
L.Ed.2d 500 (1981); Ford Motor Co. v. United States, 405 U.S. 562, 582, 92 S.Ct. 1142, 31 L.Ed.2d 492
(1972). See also Mills and Elzinga, Testing for Predation: Is Recoupment Feasible, 34 Antitrust Bulletin
868 (1989). Spirit's other experts and Northwest's experts are also eminently qualified.

5. Professor Dempsey's research touched on the issues in this action, quoting Northwest's Michael Levine
that I believe predation is possible and that it occurs [I]t is possible for an incumbent to impose on
prospective entrants nonrecoverable costs by pricing in a way that seeks to ensure that they do not attract
a significant share of passengers regardless of the incumbent's own cost. Id. at 708. Professor Dempsey
cites Dr. Alfred Kahn who described Northwest as having a scorched-earth policy in which Northwest
drove another low fare carrier, People Express, out of the market by substantially undercutting People
Express's price while simultaneously increasing the number of flights in the market: If predation means
anything, it means deep, pinpointed, discriminatory price cut by big companies aimed at driving price
cutters out of the market, in order then to be able to raise price back to their previous levels. I have little
doubt that is what Northwest was and is trying to do. Id. See also Russell A. Klingaman, Predatory
Pricing and Other Exclusionary Conduct in the Airline Industry: Is Antitrust Law the Solution? 4 DePaul
Bus. L.J. 281, 306 (1992) (quoting Michael Levine: an incumbent who used such tactics [below-cost
pricing and yield management] a few times quickly develops a reputation for fierce response to entry.
[Levine] calls this reputational information the predatory investment in deterrence.) (footnotes omitted).

6. Citing Phillip E. Areeda and Herbert Hovenkamp, Antitrust Law, Vol. III, 740 at p. 428 (2d edition
2002).

7. In his report on variable costs, Professor Elzinga also found that In the airline industry, there are
several layers of marginal (i.e.variable) costs Think of these as passenger variable costs and include the
cost of processing the ticket, the cost of processing the passenger through the gate, the cost of in-flight food
and beverages, insurance and other liability related expenses, and the cost of the extra fuel burned because
of the passenger's additional weight [F]light variable costs include the single-passenger variable costs
described above, plus takeoff or landing fees, the fuel costs of flying the empty aircraft, and some additional
maintenance and crew costs incurred from the operation of the aircraft.The third are the costs [that]
include the opportunity cost associated with the use of that aircraft Finally route variable costs include
all of the costs listed above plus costs incurred in setting the new station with ticket counters, maintenance
facilities, and other service expenses. (J.A. 789-90).

8. Professor Ordover explained that VABS is equal to total onboard revenue (for the route segment) plus
net beyond revenue contribution, minus variable expenses. VABSO is equal to VABS minus the cost of
aircraft ownership. These measures which include the beyond contribution are used by Northwest in
order to assess the profitability of individual routes as part of the overall network. VABS is often used for
relatively short-term tactical marketing decisions and VABSO is frequently used to determine whether a
route is successful over time. (J.A. 401, n. 44).

9. Economists note that to avoid costly litigation, proof of recoupment alone can serve as an independent
screening mechanism for predatory pricing claims. See Donald J. Boudreaux, Kenneth G. Elzinga and
David Mills, The Supreme Court's Predation Odyssey: From Fruit Pies to Cigarettes, 4 Sup.Ct. Econ. Rev.
57, 72 (1995).

1. As I discuss infra, despite Northwest's argument to the contrary, our opinion in Directory Sales
Management Corp. v. Ohio Bell Telephone Co., 833 F.2d 606 (6th Cir.1987), does not stand for the
proposition that we must evaluate Northwest's practices on a route-wide basis rather than a more
segmented fare-specific analysis.

2. Northwest argues in its brief that this issue has already been decided by Sixth Circuit precedent.
Specifically, Northwest claims that our holding in Directory Sales Management, requires a court to look at
an alleged predator's operations taken as a whole. 833 F.2d at 614. I do not find this case to be on
point. In Directory Sales, the two companies competed in the exact same market but the plaintiff
attempted to isolate one portion within that market to demonstrate that the incumbent was predatorily
pricing. Id. at 613. We held that the portion which the plaintiff identified was neither a separate product
nor a separate market and that the plaintiff would need to show predatory pricing in the market as a whole.
Id. at 614. Critical to our holding in that case was that the two companies' businesses were coextensive.
By contrast, in this case, Spirit's service is not coextensive with Northwest's service. Spirit alleges that
Northwest engaged in predatory pricing in the only market in which Spirit serves, i.e., local, price-sensitive
passengers. If a reasonable trier of fact finds that such a distinct market exists, then Spirit has alleged a
cognizable 2 claim. Therefore, I conclude that our holding in Directory Sales does not apply.

HAYNES, D. J., delivered the opinion of the court, in which CLAY, J., joined. MOORE, J. (pp. 953-59),
delivered a separate opinion concurring in the judgment.